Form 8027 Allocation, Step by Step — the IRS Gross-Receipts Example
From the 2026 Instructions for Form 8027: gross receipts $100,000, indirect tips reported $500, six servers.
- Gross receipts × 8% = $8,000.
- Subtract indirect tips: $8,000 − $500 = $7,500.
- Each server's share: $7,500 × their receipts ÷ $100,000 (A: $18,000 → $1,350).
- Subtract each server's reported tips to get their shortfall (A: $1,350 − $1,080 = $270). C reported more than their share, so has no shortfall.
- Tips to allocate: $8,000 − all tips reported ($6,200) = $1,800.
- Share $1,800 by shortfall: A gets $1,800 × 270 ÷ 1,885.
| Server | Receipts | Tips reported | Allocated |
|---|---|---|---|
| A | $18,000.00 | $1,080.00 | $258.00 |
| B | $16,000.00 | $880.00 | $306.00 |
| C | $23,000.00 | $1,810.00 | $0.00 |
| D | $17,000.00 | $800.00 | $454.00 |
| E | $12,000.00 | $450.00 | $430.00 |
| F | $14,000.00 | $680.00 | $353.00 |
The IRS rounds each line to whole dollars, so the total is $1,801.00. Allotip can round to cents or whole dollars.
Last reviewed 2026-10-28. General information, not tax advice. Your tax adviser can tell you what applies to you.