Form 8846 Credit for Employer Social Security and Medicare Taxes P

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Credit for Employer Social Security and Medicare Taxes
Paid on Certain Employee Tips

Department of the Treasury
Internal Revenue Service

Name(s) shown on return

Signature

OMB No. 1545-1414

2006

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Attachment
Sequence No.

Attach to your tax return.

98

Identifying number

Note. Claim this credit only for social security and Medicare taxes paid by a food or beverage establishment where tipping is
customary for providing food or beverages. See the instructions for line 1.
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Tips received by employees for services on which you paid or incurred employer social security
and Medicare taxes during the tax year (see instructions)
Tips not subject to the credit provisions (see instructions)
Creditable tips. Subtract line 2 from line 1
Multiply line 3 by 7.65% (.0765). If you had any tipped employees whose wages (including tips)
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exceeded $94,200, see instructions and check here
Credit for employer social security and Medicare taxes paid on certain employee tips from
partnerships and S corporations.
Current year credit. Add lines 4 and 5. Partnerships and S corporations, report this amount
on Schedule K; all others, report this amount on Form 3800, line 1j

General Instructions
Section references are to the Internal
Revenue Code.

What’s New
● The tax liability limit is no longer figured
on this form; instead, it must be figured on
Form 3800, General Business Credit.
● Taxpayers that are not parternerships or
S corporations and whose only source of
this credit is from those pass-through
entities, are not required to complete or file
this form. Instead, they can report this
credit directly on line 1j of Form 3800.

Purpose of Form
Certain food and beverage establishments
(see Who Should File below) use Form 8846
to claim a credit for social security and
Medicare taxes paid or incurred by the
employer on certain employees’ tips. The
credit is part of the general business credit.
You can claim or elect not to claim the
credit any time within 3 years from the due
date of your return on either your original
return or on an amended return.

Who Should File
File Form 8846 if you meet both of the
following conditions.
1. You had employees who received tips
from customers for providing, delivering, or
serving food or beverages for consumption
if tipping of employees for delivering or
serving food or beverages is customary.
2. During the tax year, you paid or
incurred employer social security and
Medicare taxes on those tips.

How the Credit Is Figured
Generally, the credit equals the amount of
employer social security and Medicare taxes
paid or incurred by the employer on tips
received by the employee. However, the
employer social security and Medicare taxes
on tips that are used to meet the Federal
minimum wage rate applicable to the
employee under the Fair Labor Standards Act
are not included in the computation. The
Federal minimum wage rate is $5.15 per hour.

For example, an employee worked 100
hours and received $350 in tips for October
2006. The worker received $375 in wages
(excluding tips) at the rate of $3.75 an hour.
Because the Federal minimum wage rate
was $5.15 an hour, the employee would
have received wages, excluding tips, of
$515 had the employee been paid at the
Federal minimum wage rate. Thus, only
$210 of the employee’s tips for October
2006 is taken into account for credit
purposes.

Specific Instructions
Figure the current year credit from your
trade or business on lines 1 through 4.

Line 1
Enter the tips received by employees for
services on which you paid or incurred
employer social security and Medicare
taxes during the tax year. Include tips
received from customers for providing,
delivering, or serving food or beverages for
consumption if tipping of employees for
delivering or serving food or beverages is
customary.

Line 2
If you pay each tipped employee wages
(excluding tips) equal to or more than the
Federal minimum wage rate, enter zero on
line 2.
Figure the amount of tips included on line
1 that are not creditable for each employee
on a monthly basis. This is the total amount
that would be payable to the employee at
the Federal minimum wage rate reduced by
the wages (excluding tips) actually paid to
the employee during the month. Enter on
line 2 the total amounts figured for all
employees.

Line 4
If any tipped employee’s wages and tips
exceeded the 2006 social security tax wage
base of $94,200 subject to the 6.2% rate,
check the box on line 4 and attach a
separate computation showing the amount
of tips subject to only the Medicare tax rate

For Paperwork Reduction Act Notice, see instructions.

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of 1.45%. Subtract these tips from the line
3 tips, and multiply the difference by .0765.
Then, multiply the tips subject only to the
Medicare tax by .0145. Enter the sum of
these amounts on line 4.
Reduce the income tax deduction for
employer social security and Medicare
taxes by the amount on line 4.
Paperwork Reduction Act Notice. We ask
for the information on this form to carry out
the Internal Revenue laws of the United
States. You are required to give us the
information. We need it to ensure that you
are complying with these laws and to allow
us to figure and collect the right amount of
tax.
You are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB
control number. Books or records relating
to a form or its instructions must be
retained as long as their contents may
become material in the administration of
any Internal Revenue law. Generally, tax
returns and return information are
confidential, as required by section 6103.
The time needed to complete and file this
form will vary depending on individual
circumstances. The estimated burden for
individual taxpayers filing this form is
approved under OMB control number
1545-0074 and is included in the estimates
shown in the instructions for their individual
income tax return. The estimated burden for
all other taxpayers who file this form is
shown below.
Recordkeeping

6 hr., 27 min.

Learning about
the law or the form

18 min.

Preparing and sending
the form to the IRS

24 min.

If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form simpler,
we would be happy to hear from you. See
the instructions for the tax return with which
this form is filed.

Cat. No. 16148Z
Printed on recycled paper

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Form

8846

(2006)