IRS Form 8027 — Employer’s Annual Information Return of Tip Income and Allocated Tips. It is particularly relevant to qualifying restaurants, bars, and other food or beverage establishments that must report tip information to the IRS and may need to allocate tips to certain employees. The 2026 form also adds a question about participation in a voluntary IRS tip-reporting program.

From AIM Financial — Tax Preparation Services in Grand Rapids, Kentwood, Wyoming, and West Michigan

Restaurants, bars, and other qualifying food and beverage businesses have special federal tax reporting responsibilities when employees receive tips. Understanding these requirements can help business owners prepare accurate payroll records, issue correct Forms W-2, and avoid potential IRS penalties.

IRS Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, is used by qualifying employers to report information about sales, charged tips, reported tips, and allocated tips. AIM Financial helps businesses understand tax forms and prepare accurate tax filings.

What Is IRS Form 8027?

Form 8027 is an annual information return that certain large food or beverage establishments must file with the IRS. It helps the IRS compare an establishment’s sales and tip information with the tips employees report.

The form serves two main purposes:

• Reporting required information about receipts and tips at qualifying establishments.
• Determining whether tips must be allocated to certain directly tipped employees.

The form is generally an employer reporting requirement rather than an individual employee tax return. Employees may see the result of an allocation on their Form W-2, particularly in Box 8.

You can find the current form and instructions at the official IRS Form 8027 page.

Which Businesses Must File Form 8027?

Generally, Form 8027 is required for a qualifying large food or beverage establishment located in the United States where tipping employees is customary and the employer normally employed more than 10 employees on a typical business day during the preceding calendar year.

The employee test is based on the hours worked by employees, not simply the number of people on the payroll at one moment. The IRS provides a worksheet to help employers determine whether they meet the filing requirement.

Businesses that may need to review Form 8027 include:

• Full-service restaurants.
• Bars and taverns.
• Restaurants located within hotels, casinos, or other larger facilities.
• Certain other food and beverage establishments where tipping is customary.

Not every restaurant must file Form 8027. For example, fast-food operations are generally excluded from the large food or beverage establishment definition for this purpose. The rules can also apply separately to qualifying establishments operated by the same employer, so business owners should review each location and the applicable IRS instructions.

New establishments have special rules for determining whether they must begin filing. Owners should not assume that a newly opened restaurant is automatically exempt.

What Information Does Form 8027 Report?

Form 8027 gathers information about the establishment and its tip activity during the calendar year. The 2026 form includes the following major items.

Establishment and employer information: The form identifies the establishment, employer identification number (EIN), address, type of operation, and establishment number.

Credit-card and other charged tips: Employers report applicable charged tips and related charge receipts. If the establishment accepts credit cards, debit cards, or other charges, the relevant lines must be completed according to the instructions.

Service charges paid as wages: Certain service charges of less than 10% that are paid to employees as wages must be reported in the designated section. Service charges are not automatically treated as tips for federal tax purposes.

Employee-reported tips: The form reports tips from directly and indirectly tipped employees as required by the instructions.

Gross receipts: The employer reports qualifying food and beverage receipts. These figures are used in the calculation that may determine whether tip allocations are required.

Allocated tips: If the amount calculated under the IRS rules exceeds the tips reported by employees, the employer may need to allocate the difference to directly tipped employees.

Number of directly tipped employees: The form asks for the total number of directly tipped employees who worked at the establishment during the calendar year.

Accurate sales and payroll records are essential because these figures must be consistent with the employer’s underlying business records.

What Are Allocated Tips?

Allocated tips are amounts an employer may be required to assign to directly tipped employees when reported tips fall below the applicable IRS calculation.

Under the general rules, an establishment calculates 8% of its applicable gross receipts, unless the IRS has approved a lower rate. If the amount calculated exceeds the total tips reported by employees, the difference may need to be allocated.

The IRS permits specific allocation methods, including methods based on gross receipts, hours worked in eligible circumstances, or a qualifying good-faith agreement.

For example, suppose a restaurant’s applicable gross receipts are $1,000,000. Eight percent of that amount is $80,000. If the relevant employee-reported tips total $70,000, the potential difference is $10,000. Whether and how that amount must be allocated depends on the full IRS rules and the establishment’s circumstances.

Allocated tips are generally reported in Box 8 of the affected employee’s Form W-2. They are not automatically included in the employee’s Social Security wages, Medicare wages, or federal income tax withholding wages. Employees may have separate responsibilities for reporting allocated tips and calculating applicable taxes on their individual returns.

Employers should not treat allocated tips as additional wages paid out of the restaurant’s bank account. Allocation is a tax reporting process, not necessarily a transfer of additional money to the employee.

How Do You Complete Form 8027?

Preparing Form 8027 begins with organized records rather than filling in the form at the last minute.

1. Confirm whether filing is required. Review the establishment’s operations and employee-hour information using the current IRS instructions.
2. Identify each establishment. Use the correct business information, EIN, and establishment number. A separate form is generally required for each qualifying establishment.
3. Gather sales and tip records. Reconcile point-of-sale reports, charged tips, employee tip reports, and gross receipts.
4. Calculate the tip allocation, if applicable. Follow the IRS calculation and use an approved method.
5. Complete the applicable questions and lines. The 2026 form includes a question asking whether the establishment participated in a voluntary IRS tip-reporting program during the calendar year.
6. File using the correct method and deadline. Keep a copy of the submitted return and supporting documentation.

For 2026 filings, the IRS has retired the FIRE electronic filing system for Form 8027. The Information Returns Intake System (IRIS) is now the available electronic filing system. Employers required to file 10 or more information returns during the year generally must file electronically, subject to applicable exceptions and waiver procedures.

Review the current Instructions for Form 8027 for the applicable deadlines, filing procedures, and line-by-line requirements.

What Records Should Restaurant Owners Keep?

Businesses should retain records that support the information reported on Form 8027, including:

• Daily sales and gross-receipt reports.
• Credit-card and electronic payment records.
• Employee tip reports and tip-pooling records.
• Payroll registers and Forms W-2.
• Employee hours and work schedules.
• Calculations supporting allocated tips.
• Copies of filed Forms 8027 and any related correspondence.

The IRS instructions generally require records supporting the return, employee statements, and tip allocations to be kept for three years after the due date of the related return or statement. Other tax or employment requirements may call for longer retention.

Employers should also distinguish voluntary tips from mandatory service charges. A service charge distributed to an employee is generally treated as wages rather than tips and must be handled under the applicable payroll tax rules.

Get Help With Restaurant Tax Reporting From AIM Financial

Restaurant owners already manage employees, vendors, inventory, sales, and payroll. Adding specialized tip reporting can make tax compliance more complicated, particularly when a business operates multiple locations or must allocate tips.

AIM Financial assists businesses in Grand Rapids, Kentwood, Wyoming, and throughout West Michigan with tax preparation and understanding federal tax reporting requirements. We can help you organize business tax information, review applicable forms, and prepare for filing deadlines.

If you operate a restaurant, bar, or another food or beverage establishment, contact AIM Financial to discuss your tax preparation needs. Taking the time to review tip reporting before filing can help reduce errors and keep your business tax records organized.

This article is for general educational purposes only. Form 8027 filing requirements and tip allocation rules depend on the establishment’s operations and current federal tax law. Consult the applicable IRS instructions for your filing year.