Form 8027 Tip Allocation Calculator
Estimate your restaurant’s 8% benchmark and tip-reporting shortfall. Optionally allocate the shortfall among directly tipped employees using the gross receipts method.
8027 tip allocation estimate
How tip allocation works
Form 8027 compares employee-reported tips with 8% of allocable gross receipts, unless the IRS has approved a lower rate. If reported tips are below that benchmark, the shortfall generally must be allocated to directly tipped employees through an authorized method. This calculator gives the establishment-level shortfall and an optional gross-receipts-method estimate by employee.
The gross receipts method requires carefully attributed employee receipts and tips; payroll-period choices, good-faith agreements, hours-worked eligibility and IRS-approved lower rates can change the outcome. Do not add allocations to cash tip withholding automatically. Compare the result with the complete IRS instructions.
Example: $100,000 allocable gross receipts × 8% = $8,000. If employees reported $6,500 in tips, the aggregate shortfall is $1,500. Employee allocations depend on the permitted method.