What do I owe on my unreported tips?
Who must file
- You received $20 or more in cash and charge tips in a calendar month and didn't report all of them to your employer, or
- Your W-2 shows allocated tips in box 8 that you must report as income.
Cash tips include tips paid by cash, check, debit card and credit card. If you get $20 or more in a month, you must report all of them to your employer in writing.
The form, line by line (2025)
| Line | What goes there |
|---|---|
| 1 | Each employer: name, EIN, total tips received (column c) and tips reported (column d) |
| 2–4 | Total tips received minus tips reported = unreported tips. Line 4 also goes on Form 1040, line 1c. |
| 5–6 | Subtract tips under $20 in a month that you didn't have to report; the rest is subject to Medicare tax |
| 7–10 | Social Security wage limit ($176,100 for 2025) minus wages already taxed, to find tips subject to Social Security tax |
| 11 | Line 10 × 6.2% Social Security tax |
| 12 | Line 6 × 1.45% Medicare tax |
| 13 | Total, to Schedule 2 (Form 1040), line 5 |
A server received $3,000 in cash tips in 2025 and reported none of it. Wages are well under the Social Security limit.
Social Security: $3,000 × 6.2% = $186. Medicare: $3,000 × 1.45% = $43.50.
Form 4137 tax: $229.50, plus income tax on the $3,000 through Form 1040.
Didn't report tips to your employer as required? The IRS can charge a penalty equal to 50% of the Social Security and Medicare tax due on those tips, unless you had reasonable cause. Married? Each spouse with unreported tips files a separate Form 4137. An extra 0.9% Additional Medicare Tax can apply on Form 8959 at higher incomes.
Form 4137 and the no tax on tips deduction
For 2025 through 2028 you can deduct up to $25,000 of qualified tips. With one employer, Schedule 1-A line 4b takes the qualified tips included on Form 4137, line 1, row A, column (c), which counts tips you already reported as well as unreported ones. Line 4c uses the larger of line 4a (W-2 box 7) or line 4b, so don't add them together. With more than one employer you use a worksheet instead. The usual rules apply: a job on the IRS tipped occupations list, voluntary tips, a Social Security number valid for work, and a joint return if you are married. Income tax on them can go down; the Social Security and Medicare tax on Form 4137 stays. Estimate it with the no tax on tips calculator, or fill in Schedule 1-A.
Common questions
What is Form 4137 used for? To figure the Social Security and Medicare tax you owe on tips you didn't report to your employer, including allocated tips in box 8 of your W-2 that you must report as income. Filing it credits those tips to your Social Security record.
Who has to file Form 4137? You must file it if you received $20 or more in cash and charge tips in a calendar month and didn't report all of them to your employer, or if your W-2 shows allocated tips in box 8 that you must report as income.
What tax rate does Form 4137 use? 6.2% Social Security tax on unreported tips, up to the yearly wage limit ($176,100 for 2025), and 1.45% Medicare tax on all of them. The total goes on Schedule 2 (Form 1040), line 5.
Do tips on Form 4137 count for the no tax on tips deduction? Yes, they can. With one employer, Schedule 1-A line 4b takes the qualified tips included on Form 4137, line 1, row A, column (c), which counts tips you already reported too, and line 4c uses the larger of that or W-2 box 7. Don't add the two together. The usual rules still apply: a job on the IRS tipped occupations list, voluntary tips, a Social Security number valid for work, and a joint return if you are married.
Should I use Form 4137 if I got a 1099 instead of a W-2? No. If you believe you were an employee but were paid on Form 1099-MISC or 1099-NEC, the IRS says to use Form 8919 instead.
Updated November 5, 2026. Source: IRS Form 4137 (2025), Social Security and Medicare Tax on Unreported Tip Income, and its instructions; 2025 Schedule 1-A (Form 1040).