The single most overlooked credit in a tipped restaurant's tax return.
If you operate a full-service restaurant in the United States and your servers earn tips, the federal government has, for more than three decades, offered to refund a portion of the payroll tax you paid on those tips. The mechanism is Section 45B of the Internal Revenue Code, and the form is IRS Form 8846. It is not new. It is not obscure. It is, by any reasonable measure, one of the most predictable, most defensible, and most chronically unclaimed credits available to a restaurant owner.
The reason is straightforward: most general-practice tax preparers do not specialize in restaurants. The credit is available only to food and beverage establishments where tipping is customary, and the calculation requires data — total tipped wages, the employer's share of FICA, the frozen $5.15 minimum-wage base — that lives in your payroll system, not your tax return. If your CPA does not ask, and your bookkeeping does not surface it, the credit goes unclaimed. Year after year.
The credit flows through Form 8846 to your business return. It is non-refundable but carries forward 20 years. For an LLC taxed as a partnership or S-corporation, it passes through to the owners' personal returns on Schedule K-1. Either way it lands on Form 3800, the General Business Credit summary. None of this is unusual. All of it is recoverable on amended returns going back three years, if you have not been claiming it.
The remainder of this chapter walks through the precise calculation, the documentation the IRS will look for, the interaction with the Work Opportunity Tax Credit, and the strategy for restaurants in states that have raised tipped-wage minimums above the federal floor — a situation that does not eliminate the credit, but does change its math…