The National Directory of Certified Public Accountants

Ask A CPA - Tip Income Reporting

Employer Form 8027 - 8% Tip Reporting Guideline

The law requires your employees to report 100% of tip income and the 8% threshold is only one way that the IRS monitors compliance and flags under reporting restaurants. The 8% percentage that is used on the Form 8027 is just a IRS guideline. Just because this is the “threshold” number that the form uses to require you to allocate additional tip income does not mean that this is all you need to report to be safe from an IRS audit. The law requires your employees to report 100% of tip income

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