Federal Form 4137 - Social Security and Medicare Tax on Unreported Tip Income Instructions

General Instructions  

What's New 

For 2012, the maximum wages and tips subject to social security increased to $110,100. The social security tax rate an employee must pay on tips is 4.2% (.042).

Purpose of form. Use Form 4137 only to figure the social security and Medicare tax owed on tips you did not report to your employer, including any allocated tips shown on your Form(s) W-2 that you must report as income. You must also report the income on Form 1040, line 7; Form 1040NR, line 8; or Form 1040NR-EZ, line 3. By filing this form, your social security and Medicare tips will be credited to your social security record (used to figure your benefits).

CAUTION! If you believe you are an employee and you received Form 1099-MISC, Miscellaneous Income, instead of Form W-2, Wage and Tax Statement, because your employer did not consider you an employee, do not use this form to report the social security and Medicare tax on that income. Instead, use Form 8919, Uncollected Social Security and Medicare Tax on Wages.

Who must file. You must file Form 4137 if you received cash and charge tips of $20 or more in a calendar month and did not report all of those tips to your employer. You must also file Form 4137 if box 8 of your Form(s) W-2 shows allocated tips that you must report as income.

Allocated tips. You must report all your tips from 2012, including both cash tips and noncash tips, as income on Form 1040, line 7; Form 1040NR, line 8; or Form 1040NR- EZ, line 3. Any tips you reported to your employer in 2012 are included in the wages shown in box 1 of your Form W-2. Add to the amount in box 1 only the tips you received in 2012 and did not report to your employer. This should include any allocated tips shown in box 8 on your Form(s) W-2, unless you have adequate records to show that your unreported tips are less than the amount in box 8. Although allocated tips are shown on your Form W-2, they are not included in the wages, tips, and other compensation box (box 1) on that form and no income tax, social security tax, or Medicare tax has been withheld from these tips.

Tips you must report to your employer. You must give your employer a written report of cash and charge tips if you received $20 or more in tips during a month. If, in any month, you worked for two or more employers and received tips while working for each, the $20 rule applies separately to the tips you received while working for each employer and not to the total you received. Your reportable tips include cash tips received from customers, charged tips (credit and debit card charges) distributed to you by your employer, and tips received from other employees under any tip-sharing arrangement. You must report your tips to your employer by the 10th day of the month following the month you received them. If the 10th day of the month falls on a Saturday, Sunday, or legal holiday, give your employer the report by the next business day.

Employees subject to the Railroad Retirement Tax Act. Do not use Form 4137 to report tips received for work covered by the Railroad Retirement Tax Act. In order to get railroad retirement credit, you must report these tips to your employer.

Payment of tax. Tips you reported to your employer are subject to social security and Medicare tax (or railroad retirement tax) and income tax withholding. Your employer collects these taxes from wages (excluding tips) or other funds of yours available to cover them. If your wages were not enough to cover these taxes, you may have given your employer the additional amounts needed. Your Form W-2 will include the tips you reported to your employer and the taxes withheld. If there was not enough money to cover the social security and Medicare tax (or railroad retirement tax), your Form W-2 will also show the tax due in box 12 with codes A and B. See the instructions for Form 1040, line 60, or Form 1040NR, line 59, to find out how to report the tax due. If you worked in American Samoa, Guam, or the U.S. Virgin Islands, the amount of uncollected tax due is identified in box 12 on Form W-2AS, W-2GU, or W-2VI with codes A and B. If you worked in Puerto Rico, Form 499R-2/W-2PR, boxes 22 and 23, show the uncollected tax due. See the instructions for line 5 of Form 1040-PR or 1040-SS to find out how to report the tax due.

Penalty for not reporting tips. If you did not report tips to your employer as required, you may be charged a penalty equal to 50% of the social security and Medicare tax due on those tips. You can avoid this penalty if you can show that your failure to report tips to your employer was due to reasonable cause and not due to willful neglect. To do so, you can attach a statement to your return explaining why you did not report them.

Additional information. See Pub. 531, Reporting Tip Income.

Specific Instructions  

Line 1. Complete a separate line for each employer. If you had more than five employers in 2012, attach a statement that contains all of the information (and in a similar format) as required on Form 4137, line 1, or complete and attach line 1 of additional Form(s) 4137. Complete lines 2 through 13 on only one Form 4137. The line 2 and line 3 amounts on that Form 4137 should be the combined totals of all your Forms 4137 and attached statement. Include your name, social security number, and calendar year (2012) on the top of any attachment.

Column (a). Enter your employer's name exactly as it is entered in box c of your Form W-2.

Column (b). For each employer's name you entered in column (a), enter the employer identification number or the words "applied for" exactly as shown in box b of your Form W-2.

Column (c). Include all cash and charge tips you received. This includes the following:

  • Total tips you reported to your employer on time. Tips you reported, as required, by the 10th day of the month following the month you received them are considered income in the month you reported them. For example, tips you received in December 2011 that you reported to your employer after December 31, 2011, but by January 10, 2012, are considered income in 2012 and should be included on your 2012 Form W-2 and reported on line 1 of Form 4137. However, tips you received in December 2012 that you reported to your employer after December 31, 2012, but by January 10, 2013, are considered income in 2013. Do not include these tips on line 1.
  • Tips you did not report to your employer on time or did not report at all. This should include any allocated tips shown in box 8 on your Form(s) W-2 unless you can prove that your unreported tips are less than the amount in box 8. Tips you did not report to your employer on time or did not report at all are considered income to you in the month you actually received them. For example, tips you received in December 2012 that you reported to your employer after January 10, 2013, are considered income in 2012 because you did not report them to your employer on time.
  • Tips you received that you were not required to report to your employer because they totaled less than $20 during the month.
  • Allocated tips you must report as income (see page 1).

Line 5. Enter only the tips you were not required to report to your employer because the total received was less than $20 in a calendar month. These tips are not subject to social security and Medicare tax.

Line 10. If line 6 includes tips you received for work you did as a federal, state, or local government employee and your pay was subject only to the 1.45% Medicare tax, subtract the amount of those tips from the line 6 amount only for the purpose of comparing lines 6 and 9. Do not reduce the actual entry on line 6. Enter "1.45% tips" and the amount you subtracted on the dotted line next to line 10.

Line 11. Multiply the amount on line 10 by .042 (the social security rate for 2012).

Line 13. Form 1040-SS and Form 1040-PR filers, include the amount from line 13 on line 5 of Form 1040-SS or Form 1040-PR. See the instructions for Form 1040-SS or Form 1040-PR for more information.