To fill out Form 4137, you list each employer where you had unreported tips, calculate your total unreported tips for the year, and then compute the 6.2 percent Social Security and 1.45 percent Medicare tax you owe on that amount. The completed form gets attached to your Form 1040, 1040-SR, or 1040-NR, with the tip total flowing to your wages on line 1c and the tax flowing to Schedule 2, line 5.
Before You Start
You need this form if you received cash or charge tips of $20 or more in any single calendar month from one employer and didn’t report the full amount to that employer by the tenth of the following month.1Internal Revenue Service. Form 4137 – Social Security and Medicare Tax on Unreported Tip Income You also need it if your W-2 Box 8 shows allocated tips that you have to include as income because you don’t have records showing you actually received less.2Internal Revenue Service. Tip Recordkeeping and Reporting
Gather three things before you open the form:
- Your W-2 from every tipped job (you’ll pull the employer name, EIN from Box b, Social Security wages from Box 3, Social Security tips from Box 7, and any allocated tips from Box 8).
- Your daily tip records for the year, or your best reconstruction of them. Tips you received through a tip pool or split count as your cash tips; tips you paid out to coworkers reduce your total, so report the net.2Internal Revenue Service. Tip Recordkeeping and Reporting
- Your Social Security number.
One boundary before you begin: mandatory service charges, like an automatic 18 percent gratuity on large parties, are not tips. Those are regular wages your employer already withholds on and they do not belong on Form 4137.3Internal Revenue Service. Interim Guidance on Rev. Rul. 2012-18 (Announcement 2012-25)
The header of the form asks only for your name, Social Security number, and the tax year. Everything else runs through thirteen numbered lines.
Lines 1 Through 6: Report Your Unreported Tips
Line 1 is a table with one row for each employer where you had unreported tips. Each row has four columns:
- Column (a): the employer’s name.
- Column (b): the employer identification number, from Box b of that employer’s W-2.
- Column (c): the total cash and charge tips you received at that job for the entire year. This includes tips you reported, tips you didn’t report, and any allocated tips from Box 8 you have to include as income.
- Column (d): the tips you actually reported to that employer during the year, which appears in Box 7 of the W-2.
If you had more than one tipped job, give each employer its own row.
Line 2 is the total of column (c) across all rows. Line 3 is the total of column (d). Line 4 is Line 2 minus Line 3, which is your total unreported tips for the year. Copy that Line 4 number onto Form 1040, 1040-SR, or 1040-NR at line 1c as additional wage income.1Internal Revenue Service. Form 4137 – Social Security and Medicare Tax on Unreported Tip Income
Line 5 is where you back out any tips that were under $20 in a given month at a given employer. Those small amounts never triggered the reporting duty in the first place, so they aren’t subject to the Form 4137 tax, even though they remain taxable income on your return. Line 6 is Line 4 minus Line 5. That’s the amount subject to Medicare tax, and it’s the base you’ll work from for the rest of the form.1Internal Revenue Service. Form 4137 – Social Security and Medicare Tax on Unreported Tip Income
Lines 7 Through 13: Calculate the Tax
Lines 7 through 10 figure out how much of your unreported tips also fits under the annual Social Security wage cap. Medicare tax has no cap; Social Security tax does. For the 2026 tax year, the cap is $184,500.4Social Security Administration. Contribution and Benefit Base
- Line 7: enter the Social Security wage base for the tax year.
- Line 8: add up your Social Security wages and Social Security tips from every W-2, meaning the totals of Box 3 and Box 7. This is what your employers already applied Social Security tax to.
- Line 9: Line 7 minus Line 8. If your already-taxed wages exceeded the cap, enter zero.
- Line 10: the smaller of Line 6 or Line 9. That’s the portion of your unreported tips still under the cap.
Now compute the tax itself:
- Line 11: Line 10 multiplied by 6.2 percent, the employee Social Security rate.4Social Security Administration. Contribution and Benefit Base
- Line 12: Line 6 multiplied by 1.45 percent, the employee Medicare rate.5Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
- Line 13: Line 11 plus Line 12. This is your total tax on unreported tips.
Copy the Line 13 amount to Schedule 2 (Form 1040), line 5.1Internal Revenue Service. Form 4137 – Social Security and Medicare Tax on Unreported Tip Income
The Additional Medicare Tax Reference
Form 4137 doesn’t compute the Additional Medicare Tax itself. If your total Medicare wages, tips, and self-employment income exceed $200,000 (or $250,000 if you’re married filing jointly), an extra 0.9 percent applies. Carry your Form 4137 Line 6 amount over to Form 8959, Additional Medicare Tax, at line 2, and compute the extra tax there.6Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
Attach It and File
Attach Form 4137 to your Form 1040, 1040-SR, or 1040-NR. Paper filers should place it behind the main return in the same envelope. Most tax software generates and transmits the form automatically once you enter unreported tip income.7Internal Revenue Service. About Form 4137, Social Security and Medicare Tax On Unreported Tip Income
Two numbers leave the form. Line 4 is income and lands on Form 1040 line 1c. Line 13 is tax and lands on Schedule 2, line 5. Keep those separate as you transfer them.
Penalty for Not Reporting Tips
If you were required to report tips to your employer and didn’t, the IRS can add a penalty equal to 50 percent of the Social Security, Medicare, and Additional Medicare taxes owed on the unreported amounts.8Office of the Law Revision Counsel. 26 USC 6652 – Failure to File Certain Information Returns, Registration Statements, Etc. On $5,000 in unreported tips, the combined FICA at 7.65 percent is $382.50, and the penalty would add another $191.25.
You can ask the IRS to waive the penalty for reasonable cause. The agency looks at your effort to comply, the complexity of your situation, your understanding of the rules, and whether you got professional advice.9Internal Revenue Service. Penalty Relief for Reasonable Cause Not knowing the rule generally isn’t enough on its own. Attach a written statement explaining the circumstances, or if a penalty notice arrives later, call the number on the notice or file Form 843, Claim for Refund and Request for Abatement.
Large amounts of unreported tips can also trigger an estimated tax underpayment penalty, because nothing was withheld on those earnings during the year. If tips make up a big share of your income, quarterly estimated payments may be needed to stay clear of that separate charge.10Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
Fixing a Prior Year
If you find unreported tip income from an earlier year, file Form 1040-X, Amended U.S. Individual Income Tax Return, with a completed Form 4137 for that year attached. E-filing is available for the current year and the two prior tax periods; older years go on paper.11Internal Revenue Service. About Form 1040-X, Amended U.S. Individual Income Tax Return Amending on your own, before the IRS contacts you, generally reduces penalty and interest exposure, and it corrects your Social Security earnings record so those tips count toward your future benefits.