Form 8027 and Form 4070: tip reporting rules for restaurants, with the 1 March 2027 deadline

The restaurant got busier, the team passed a dozen people, and nobody mentioned that this also brings a new IRS form. Form 8027 is the annual tip return for larger tipped restaurants and bars. It is easy to miss, and the IRS uses it to spot tips that were never reported.

You must file Form 8027 for 2026 if your food and beverage business is in the US, tipping is customary, and you normally had more than 10 employees on a typical business day in 2025, measured as more than 80 employee hours a day. It is due Monday 1 March 2027 on paper or Wednesday 31 March 2027 electronically. If reported tips fall below 8% of sales, you must allocate the shortfall to servers. Last checked: 5 November 2026.

Does my restaurant have to file Form 8027?

Yes, if all four tests in the IRS Instructions for Form 8027 (page updated 2 November 2026) are met:

1. The operation is in the 50 states or Washington, DC.
2. Food or drink is provided for consumption on the premises (carryout aside).
3. Tipping is customary. The IRS does not consider it customary in a cafeteria-style operation, or where at least 95% of sales (other than carryout) carry a service charge of 10% or more.
4. You "normally employed more than 10 employees on a typical business day" in the previous year. This is the 10-employee test, and it is measured in hours.

The test is applied to the employer, not each site. Count employees at all your food or beverage operations, all staff (not only servers), but not employees at fast-food operations and not anyone who owns 50% or more of a corporation. If a group passes, it files a separate Form 8027 for each tipped location, "even if an individual operation, when considered separately, doesn't have more than 10 employees".

So three small full-service restaurants with six staff each can owe three Forms 8027 between them.

The 10-employee test, worked through

The IRS worksheet uses your busiest and slowest months of the prior year by food and drink sales. Here it is with numbers for a bistro checking whether it files for 2026:

Line 7 is in effect the average daily hours across the two months. A bistro with eight people working six hours a day, about 48 hours, does not file; one with fifteen people on most days usually does. A new business uses a different test: it files if, in any two consecutive months, the average hours worked each business day by all employees passes 80.

How many restaurants does this catch?

More than half of full-service restaurants pass a simple headcount proxy. This is our analysis of the Census Bureau's County Business Patterns 2023 national file (released 2025, retrieved 5 November 2026):

Treat this as a rough guide, not a count of filers. County Business Patterns counts people on the payroll in mid-March, including part-timers, while the IRS test counts hours on a typical day and adds up every site an employer runs. An establishment with exactly 10 employees sits in the "10 or more" column but fails "more than 10". The largest size class (1,000 or more) is suppressed in the file and left out. Fast-food outlets are excluded from the test, which is why we left limited-service restaurants out.

When is Form 8027 due for 2026?

If you file 10 or more information returns in total, you must file electronically. The instructions say IRIS "is now the only system available to electronically file your 2026 Form 8027"; the older FIRE system has been retired. Late or incorrect returns attract information return penalties, and a wrong Form 8027 makes the W-2s wrong too. The rest of January and February is in our filing deadlines guide.

How does tip allocation work?

If the tips your staff report in a payroll period are less than 8% of the period's gross receipts, you allocate the difference to directly tipped staff who reported less than their share. Allocated tips go on the W-2 in box 8 only. They are not wages in boxes 1, 3, 5 or 7, and you do not withhold on them.

What counts as gross receipts: food and drink sales, excluding "nonallocable receipts", which are carryout sales and checks with a service charge of 10% or more. Service charges are wages, not tips, and are not reported as tips on Form 8027; our guide to service charges and tips sets out the IRS test.

You can use a lower rate than 8%, but not below 2%, only with IRS approval: you, or a majority of directly tipped employees, petition with data showing the real tip rate. Without a determination letter, it is 8%.

Three methods are allowed. The gross receipts method is the default. The hours-worked method is open to establishments with fewer than the equivalent of 25 full-time employees, meaning under 200 employee hours a day. A good-faith agreement needs two-thirds of the tipped staff in each job category.

Worked example: allocating tips for one month

A restaurant's allocable gross receipts for the month are $120,000. Bussers and barbacks (indirectly tipped) reported $1,400. Three servers reported $7,800 between them.

Server C is the one to talk to. Allocation is not proof that C under-reported, but a pattern like this is what draws IRS attention, including a Section 3121(q) notice asking you for the employer's share of tax on unreported tips, which is reported on line 5f of Form 941. On the 2026 W-2, box 12 code TP holds "cash tips reported to the employer", and allocated tips are by definition not reported, so check with your payroll provider before they go anywhere but box 8. Our no tax on tips guide covers the new tip codes.

Is Form 4070 still used for employee tip reports?

No. IRS Publication 531 says "Form 4070 and Form 4070A are historical", made obsolete with Publication 1244 from 2024. The duty did not go away. Employees must still report cash and card tips to you by the 10th of the following month, in writing or electronically, and the statement can cover no more than one calendar month. Employees who do not report face a penalty of 50% of the Social Security and Medicare tax owed on the unreported tips.

Publication 531 lists what a statement must contain if you have no other system. Here is a template that covers it:

MONTHLY TIP REPORT

Employee name: ______________________________
Address: ____________________________________
Social Security number: _____________________
Employer: [legal name], [address]
Business name (if different): [restaurant name]

Period: from ___ / ___ / 20__ to ___ / ___ / 20__
(no longer than one calendar month)

Cash tips received:                     $ ________
Card and electronic tips received:      $ ________
Tips received through a tip pool:       $ ________
Tips paid out to others (tip-outs):     $ ________
Total tips to report for the period:    $ ________

I confirm this report is complete and correct.
Signature: ____________________  Date: ___ / ___ / 20__

Due by the 10th of the month after the period ends.
December 2026 tips: due Mon 11 January 2027.

How tips move between staff is a separate question, covered in our tip pooling guide.

Allocation worksheet you can copy

Run this each payroll period, or once for the year if your payroll provider allocates annually.

TIP ALLOCATION WORKSHEET: [LOCATION], PERIOD [__ to __]

A. Food and drink gross receipts              $ ________
B. Less carryout sales                        $ ________
C. Less checks with service charge 10%+       $ ________
D. Allocable receipts (A - B - C)             $ ________
E. Tip rate (8%, or IRS-approved rate)          ______ %
F. Target tips (D x E)                        $ ________
G. Tips reported by indirectly tipped staff   $ ________
H. Directly tipped staff's share (F - G)      $ ________
I. Tips reported by directly tipped staff     $ ________
J. Amount to allocate (F - G - I; 0 if none)  $ ________

For each directly tipped employee:
  sales attributed ____  share of H ____  reported ____
  shortfall ____  allocated (J x shortfall / total shortfall) ____

This guide is general information, so check with your accountant for your situation.

Can TablePort handle this for you?

Form 8027 starts from two numbers: what you sold and what was tipped. TablePort keeps both on the till; your accountant or payroll provider files the form.

1. At close, cash, voids, comps and tips reconcile on one screen, so each day's tips are checked before anyone takes them home, and the daily report shows tips per staff member to set against each employee's tip reports.
2. Set your own tip prompts on the card reader and keep a zero option, so card tips stay voluntary and are recorded with the sale.
3. Use the accounting exports to send daily sales, tips and tax to your accountant for the year's Form 8027 figures.

One honest limit: TablePort does not file Form 8027, allocate tips or produce W-2s. See the POS page.