TaxBandits Knowledge Base

How to request a lower allocation rate to the IRS?

To request a lower tip allocation rate from the IRS (but not lower than 2%), you must submit a petition to the IRS National Tip Reporting Compliance. Your petition for a lower rate must demonstrate that a rate less than 8% should apply. It must include the following information:

• Employer and establishment details (name, address, EIN, and establishment number).
• A detailed description of your establishment (type of restaurant, service type, hours of operation, etc.).
• Relevant information from Form 8027 (sales, service charges, carryout, etc.) for the previous year.
• Information on the type of clientele.
• A copy of a representative menu for each meal refers to the menu that shows the types of food and beverages typically offered at your establishment for breakfast, lunch, and dinner.

The petition must include a signed statement of truth under penalty of perjury, and you must attach copies of Form 8027 filed for the past three years. Additionally, you must include a check or money order made payable to “United States Treasury” for the amount of the user fee required for determination letters. The IRS will notify you when, and for how long, it is effective.

When is the deadline to submit the IRS determination letter if a lower rate is used on Form 8027? If you use a lower rate on Form 8027 based on the IRS determination letter, you must submit a copy of the letter within three business days after filing Form 8027 electronically. You can either fax the letter to 855-309-9361 or mail it to the following address: Internal Revenue Service Attn: ICO ERS M/S 6121 1973 N Rulon White Blvd. Ogden, UT 84404