Many small businesses wonder whether they need to file IRS Form 8027, the Employer’s Annual Information Return of Tip Income and Allocated Tips. The form is required mainly for food and beverage establishments that have tipped employees, but exemptions exist for small businesses. Here’s a detailed breakdown of who must file and when exemptions apply.
Who Must File Form 8027?
1. Tipped Industries
Form 8027 applies to the food and beverage industry, including restaurants, bars, and hotels, where tipping is customary.
2. Large Establishments
Employers must file Form 8027 if they qualify as a “large food or beverage establishment”, which the IRS defines as:
-
Having more than 10 employees working on a typical business day
-
Employees working more than 80 total hours collectively on that day
Small Business Exemption
A business does not need to file Form 8027 if it does not meet the thresholds above. Examples include:
-
Small businesses with 10 or fewer employees
-
Businesses outside the food or beverage industry, such as retail stores
👉 For a full guide on employer filing requirements, see our page on 1099 forms and compliance.
Key Considerations for Small Businesses
If you’re unsure whether your business meets the IRS definition of a “large establishment,” calculate:
-
The number of employees working on a typical day
-
Their combined hours worked
If your employee numbers fluctuate during the year, consult IRS guidance or use 1099 software to ensure compliance.
Voluntary Filing
Some small businesses choose to file Form 8027 voluntarily. Doing so helps maintain accurate records and prepares the business in case it grows into the “large establishment” category in future years.
Penalties for Non-Compliance
If a business is required to file Form 8027 but fails to do so, the IRS may impose penalties for late or missing filings. Unless a reasonable cause is demonstrated, these penalties can be costly.
👉 Avoid errors and penalties by using our Form 8027 filing software, which simplifies reporting and ensures compliance.