Social Security Tips on W-2: Box 7, Wage Cap, and Uncollected Tax

Social Security tips on a W-2 are the total tips you reported to your employer during the year that were subject to Social Security tax, and they appear in Box 7. They sit separately from your regular wages in Box 3, but the two boxes are added together to measure whether you’ve hit the annual Social Security earnings cap, which is $184,500 for 2026.¹

What Counts as a Tip

A tip is any amount a customer voluntarily gives you, whether in cash, added to a card charge, or shared through a tip pool with coworkers.² The customer has to choose the amount and be free not to pay it.

Mandatory service charges are not tips. An automatic gratuity on a large party’s check, a required hotel room service fee, or a set delivery charge is controlled by the employer, so those amounts count as regular wages and land in Box 3 rather than Box 7.²

How Tips Get Into Box 7

Box 7 reflects what you reported to your employer during the year. If you receive $20 or more in tips in a calendar month from a single employer, you have to report the monthly total to that employer by the 10th day of the following month.³ Tips under $20 in a month don’t have to be reported to the employer, but you still owe income tax on them when you file.

You can use IRS Form 4070, an employer form, or an electronic system, as long as the report includes your name, address, Social Security number, the employer’s name, the reporting period, the total, and your signature.³ Keeping a daily log helps those monthly totals stay accurate, because the sum of what you report over the year is what your employer puts in Box 7.

Box 7 Compared With the Other Tip and Wage Boxes

Several boxes on a W-2 involve tips, and they don’t all mean the same thing.

Box 7 (Social Security tips) shows the tips you reported that are subject to Social Security tax.⁴
Box 3 (Social Security wages) shows your regular wages subject to Social Security tax, without tips. The combined total of Box 3 and Box 7 should not exceed $184,500 for 2026.⁴
Box 5 (Medicare wages and tips) combines wages and reported tips subject to Medicare tax. Medicare has no wage cap, so Box 5 can exceed the total of Boxes 3 and 7.⁵
Box 1 (Wages, tips, other compensation) is your total taxable income, including regular wages and all reported tips.
Box 8 (Allocated tips) is different from Box 7. It shows tips your employer assigned to you because the total tips reported by staff at a large food or beverage establishment fell below 8 percent of the business’s gross receipts. Allocated tips are not included in Box 1, Box 5, or Box 7, and no tax has been withheld on them. Unless your own records show you earned less, you have to add the Box 8 amount to your return and use Form 4137 to pay the Social Security and Medicare tax owed.³⁶

The figure in Box 7 should match the total tips you reported through the year. If you earned tips you never reported, Form 4137 is how you calculate and pay the Social Security and Medicare tax on the shortfall.⁷

Why the 2026 Wage Cap Matters for Box 7

Social Security tax applies only up to $184,500 in earnings for 2026.¹ Regular wages and reported tips are combined to measure the limit, which is why Box 3 plus Box 7 is capped at that number. Once your combined total reaches $184,500, neither you nor your employer owes any more Social Security tax for the rest of the year.

The rate on those earnings is 6.2 percent from you and 6.2 percent from your employer.⁸ Medicare tax runs alongside at 1.45 percent from each side and applies to every dollar of wages and tips, with no cap.⁵

Uncollected Tax and Missing Tips

Sometimes your paycheck isn’t large enough for your employer to withhold all the Social Security and Medicare tax owed on the tips you reported. When that happens, the uncollected amounts show up in Box 12:

Those amounts are not in Box 4 or Box 6, because they were never actually withheld. You pay them when you file, on Schedule 2 of Form 1040.⁶

If you didn’t report tips to your employer as required, the IRS can add a penalty equal to 50 percent of the Social Security and Medicare tax owed on the unreported amount, on top of the tax itself.⁹ Attaching a written statement showing reasonable cause can avoid the penalty. Either way, Form 4137 is how the missed tips get reported and taxed.⁶

1
Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet
2
Internal Revenue Service. Topic No. 761, Tips – Withholding and Reporting
3
Internal Revenue Service. Tip Recordkeeping and Reporting
4
Internal Revenue Service. General Instructions for Forms W-2 and W-3 (2026)
5
Internal Revenue Service. General Instructions for Forms W-2 and W-3 (2026)
6
Internal Revenue Service. Form 4137, Social Security and Medicare Tax on Unreported Tip Income
7
Internal Revenue Service. About Form 4137, Social Security and Medicare Tax on Unreported Tip Income
8
Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax
9
Internal Revenue Service. Publication 531, Reporting Tip Income