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Allocated tips received by employees

Who needs to report allocated tips?

Tip for employers who print W-2 forms from QuickBooks

If you use the Assisted Payroll service, you must follow the procedure below so that you can send the information to the payroll service.

  1. Set up a payroll item for allocated tips.

  2. Assign allocated tips to the appropriate employees.

Reporting allocated tips

QuickBooks reports the amount for allocated tips on the employee's W-2 form. The amount is not included with wages and is not subject to any payroll taxes.

Businesses that report allocated tips are required to submit IRS Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips.

If you are using the Assisted Payroll service, the payroll service reports allocated tip income on employees' W-2 forms. However, the payroll service does not file Form 8027 for you.

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