Employer's Annual Information Return of Tip Income in Houston, Texas (2026)
Incorrect or missing tip income reporting can lead to IRS payroll tax audits, accuracy-related penalties, and disputes over employee income. You must file the Employer's Annual Information Return of Tip Income (Form 8027) with the Internal Revenue Service for each establishment where tipping occurs. Often called the Form 8027, this requirement applies to Houston employers if food or beverage sales exceed a set threshold. Key facts:
- 48 fields — ApronPrep auto-fills 40
- $0–$0 government filing fees
- Timeline varies — depends on establishment details
Analyzed from Employer's Annual Information Return of Tip Income
83% from one compliance interview
Manual entry or document upload required
Why You Need a Employer's Annual Information Return of Tip Income
Filing the Employer's Annual Information Return of Tip Income (IRS Form 8027) is a federal requirement mandated by the Internal Revenue Code (Title 26), specifically § 6053. This statute, enforced by the Internal Revenue Service (IRS), requires food and beverage establishments where tipping is customary to report annual tip income data if they meet specific criteria. In Houston, while local ordinances don't apply, this federal requirement is critical for compliance with national tax law. The law aims to ensure all tip income is reported for payroll tax purposes, directly impacting your restaurant's Social Security, Medicare, and federal income tax withholding obligations.
Failure to file this return, or filing it incorrectly, triggers a cascade of financial penalties and operational risks. Based on IRS enforcement data, the consequences include:
- Failure-to-file penalties: 5% of the unpaid tax per month, up to a maximum of 25%.
- Failure-to-pay penalties: 0.5% of the unpaid tax per month, on top of the filing penalty.
- Accrued interest on any unpaid taxes and penalties from the due date.
- Increased audit risk for your entire business, potentially leading to assessments for prior years.
- Legal exposure: While rare for simple non-filing, willful evasion or fraud can lead to criminal prosecution.
Legal code: Internal Revenue Code (Title 26)
Recent update: For the 2026 tax year, the IRS has updated the electronic filing threshold, requiring more employers to file Form 8027 electronically if they file 10 or more information returns.
Who Needs a Employer's Annual Information Return of Tip Income?
| Type | Required | Notes |
|---|---|---|
| Restaurant (Full-Service) | Required | Required if you have tipped employees, as you must report tips of $20 or more per month per Internal Revenue Code § 6053(a) and file Form 8027. |
| Bar / Nightclub | Required | Required if you have tipped employees, as tips are a primary component of compensation and must be reported annually on Form 8027 per IRC § 6053. |
| Food Truck | Not Required | Often exempt because employees typically do not receive $20 or more in tips per month in this model, falling below the IRC § 6053 reporting threshold. |
| Coffee Shop / Café | Not Required | Typically exempt as tip jars or digital tips rarely result in individual employees receiving the $20+ per month threshold mandating Form 8027 per IRS guidelines. |
See which restaurant types need this requirement — and which don't.
See Full Requirements →Field-by-Field Guide (48 Fields)
40 of 48 auto-filledAmended Return
checkboxCheck this box only if you are filing this Form 8027 to correct a previously filed return for the same calendar year, as this is the legal definition of an 'amended' submission per IRS instructions.
COMMON MISTAKE: Checking this box for a normal annual filing or incorrectly checking both 'Amended' and 'Final' when neither condition is true, which can confuse the IRS's processing system.
Final Return
checkboxCheck this box only if you will no longer be required to file Form 8027 because your establishment has permanently closed or no longer has tipped employees, as defined by IRS Publication 1244.
COMMON MISTAKE: Checking this box because it's the last return of the year, which is incorrect; this is for permanent cessation of filing, not the annual filing deadline.
Type: Alcoholic Beverages
checkboxCheck this box if your establishment serves alcoholic beverages for on-premises consumption, such as a bar, tavern, or restaurant with a liquor license, as this classification affects tip allocation rules.
COMMON MISTAKE: Checking multiple 'Type' boxes when only one should be selected, which contradicts the IRS's instruction to choose the single best descriptor for your primary business activity.
Type: Meals Other Than Evening
checkboxCheck this box if your establishment primarily serves meals during breakfast, brunch, or lunch hours, and these sales constitute the bulk of your food service receipts.
COMMON MISTAKE: Selecting this category for a full-service dinner restaurant that also serves lunch; the IRS expects you to choose the category representing your primary meal service period.
Type: Evening and Other Meals
checkboxCheck this box if your establishment serves a significant mix of both evening meals (dinner) and meals at other times (like lunch), with neither period being overwhelmingly dominant.
COMMON MISTAKE: Using this as a catch-all instead of accurately assessing your primary sales period, which can lead to an incorrect tip rate assumption during an audit.
Type: Evening Meals Only
checkboxCheck this box only if your establishment operates exclusively during dinner service hours, such as a fine-dining restaurant that is not open for lunch or breakfast.
COMMON MISTAKE: Selecting this for a restaurant that serves a late lunch or happy hour; the term 'Only' is literal and requires no other meal service periods.
Accepts Credit Cards: Yes
checkboxCheck this box if customers can pay for food, beverages, or services using a credit or debit card at any point during the tax year, as this directly impacts the calculation of charged tips.
COMMON MISTAKE: Leaving both 'Yes' and 'No' unchecked, which is a common cause for a notice or query from the IRS, as this field is required for processing.
Accepts Credit Cards: No
checkboxCheck this box only if your establishment operated on a cash-only (or check-only) basis for the entire calendar year with no credit/debit card transactions.
COMMON MISTAKE: Incorrectly checking 'No' if you accepted cards for any part of the year, which will create a discrepancy with your reported gross receipts and charged tips.
Line 7c: Allocation Method - Good Faith Agreement
checkboxCheck this box only if you have a written, IRS-approved agreement with your employees for allocating tips, as specified in IRS Revenue Procedure 2013-33; this is not a standard option for most restaurants.
COMMON MISTAKE: Selecting this method without having the formal, signed agreement on file, which provides no audit protection and can lead to penalties and back taxes if challenged.
Line 7b: Allocation Method - Gross Receipts
checkboxCheck this box to use the standard IRS allocation method based on gross receipts, which is the default and most common method for restaurants that must allocate tips because their reported tips are below 8% of sales.
COMMON MISTAKE: Failing to check any allocation method box when allocation is required (because line 8 is less than 8% of line 1), which is a frequent error that triggers IRS notices and delays processing.
ApronPrep auto-fills 40 of 48 fields from a single compliance interview — no re-typing, no guessing what the government expects.
Top 5 Employer's Annual Information Return of Tip Income Mistakes
1. Filing Form 8027 Late
Missing the February 28 deadline is the most common error. The IRS charges a penalty of $60 per return for each month or part of a month the filing is late, up to a maximum. This directly adds costs. To avoid, set a calendar reminder for early February and file electronically via the IRS FIRE System, which provides confirmation.
2. Incorrectly Reporting Gross Receipts
Entering net revenue instead of gross receipts in Part I causes mismatches. The IRS compares your reported gross receipts to other tax filings. An understatement can trigger an audit notice, adding weeks of correspondence. Report the total amount charged to customers (before any discounts or refunds), found on your point-of-sale system's sales summary report.
3. Omitting Employee Allocated Tips
Failing to complete Column (d) 'Allocated tips' in Part III for employees who reported less than 8% of gross receipts as tips leads to a mismatch with wage records. The IRS uses this to ensure tip income is taxed. A blank column for an employee who should have an allocation will result in a notice CP264, adding 2–3 weeks to resolve. Calculate the 8% allocation for any employee whose reported tips fall short.
Skip the Paperwork on Your Employer's Annual Information Return of Tip Income
ApronPrep auto-fills 40 of 48 fields from one compliance interview.
No credit card required
Employer's Annual Information Return of Tip Income by City in Texas
| City | Fee Range | Timeline |
|---|---|---|
| Dallas | ||
| Houston | ||
| San Antonio |
Timeline: 10–14 Months (Annual Process)
Accumulate and Review Employee Tip Data (Year-Round)
Throughout the year, maintain detailed records of each employee’s reported tip income from Form 8027 filings and direct tip reports. You must ensure the total tips reported by employees for the calendar year meets the minimum 8% of gross receipts threshold for large food and beverage establishments. Have your gross receipts reports and payroll summaries ready for reconciliation. Failure to accurately track this data in real time is the leading cause of filing errors and discrepancies.
Prepare IRS Form 8027 and Employer’s Annual Information Return
By February 28th, complete IRS Form 8027, “Employer’s Annual Information Return of Tip Income and Allocated Tips.” You will need your annual gross receipts from food and beverage operations, total charged tips, and the aggregate tip income reported by your employees. In Texas, this information must also be compiled into your own internal annual return for state and internal records. Ensure your establishment’s EIN and legal name are exactly as they appear on your IRS records to avoid processing delays.
File Form 8027 with the IRS
Submit the completed IRS Form 8027 to the Internal Revenue Service Center where you file your annual business tax return. Electronic filing is available and recommended for faster acknowledgment. You must file by the last day of February (February 28th, or February 29th in a leap year) following the calendar year being reported. A copy must be provided to each employee who received allocated tips. Missing the deadline can result in penalties under Internal Revenue Code Section 6721.
Other Requirements You'll Need
This is one of 13 requirements for opening a restaurant in Texas.
ADA Compliance Self-Certification
federal
Alarm System Permit/Registration
local
Application for Employer Identification Number
federal
Articles of Organization (LLC) or Articles of Incorporation (Corporation)
state
See all co-required forms and how they connect to your compliance dossier.
See All RequirementsProcessing timelines for the Employer's Annual Information Return of Tip Income vary significantly based on your filing method. The IRS processes most electronically filed Forms 8027 within a few weeks of the submission deadline, while paper filings can take several months. Since this is a federal IRS return, Texas and Houston have no separate processing timeline, but timely filing is required to avoid penalties.
There is no government filing fee to submit IRS Form 8027 itself. This is a federal informational tax return, and as posted on the IRS website, no payment is required upon submission. However, late filing or inaccurate reporting can result in significant penalties assessed by the IRS, so accuracy is critical.
No. The Employer's Annual Information Return of Tip Income (IRS Form 8027) is tied to your business's legal entity and Employer Identification Number (EIN), not to a physical address. If you relocate your Houston restaurant, you must update your business address with the IRS and file the form for the tax year covering the move. For the new location, you will need separate local permits, like a Houston City Business License/Registration.
You must file this return annually. IRS Form 8027 is due by the last day of February each year, covering the preceding calendar year's tip income. There is no "renewal"—it's a recurring annual filing obligation for any food or beverage establishment where tipping is customary and that meets specific gross receipt and employee thresholds.
There is no physical inspection for Form 8027. Compliance is verified through data matching. The IRS compares the tip income you report for employees with their individual tax returns (Form 4137) and your business's overall payroll filings. Maintaining accurate payroll records is essential, which often requires other foundational registrations like your Application for Employer Identification Number and an EFTPS Enrollment for tax payments.
About This Data
This guide is generated from ApronPrep's compliance dossier system, which uses 53 parallel AI authority experts to discover requirements, then downloads actual forms and generates field-level intelligence for each one.
For Texas specifically, we have analyzed compliance dossiers for 3 cities (Dallas, Houston, San Antonio), generating Rich FILs (Form Intelligence Layers) with 48 form fields analyzed for this requirement. Fee data is sourced from actual county department fee schedules, not estimates.
Our data is verified against official government sources and updated when regulatory changes are detected. If you find an error, please report it — accuracy is our core commitment.
Sources
- Internal Revenue Code (Title 26)
This Form Is One of 60+ Requirements.
ApronPrep discovers every permit your city requires — including the ones generic checklists miss. Pick your city for the complete package.