IRS Form 4137 – IRS Forms, Instructions, Pubs 2026 – In the service industry, tips form a significant part of many workers’ earnings. However, failing to report them properly can lead to tax complications. IRS Form 4137, officially titled “Social Security and Medicare Tax on Unreported Tip Income,” helps taxpayers calculate and pay the required taxes on tips not reported to their employers. This comprehensive guide covers everything you need to know about Form 4137, including its purpose, filing requirements, step-by-step instructions, and recent updates for the 2025 tax year. Whether you’re a waiter, bartender, or gig worker, understanding this form ensures compliance and maximizes your Social Security benefits.
What Is IRS Form 4137?
IRS Form 4137 is a specialized tax document used to compute the employee portion of Social Security (6.2%) and Medicare (1.45%) taxes on unreported tip income. This includes tips you received but didn’t report to your employer, as well as allocated tips shown in Box 8 of your Form W-2. Allocated tips are amounts your employer estimates based on total sales when actual tips aren’t fully reported by employees.
The form credits these unreported tips to your Social Security record, which can positively impact future benefits like retirement or disability payments. It’s typically attached to your individual income tax return, such as Form 1040, 1040-SR, or 1040-NR. For the 2025 tax year, the maximum wages and tips subject to Social Security tax is $176,100.
Unreported tip income must be included as wages on your tax return, even if no income tax withholding occurred. Form 4137 ensures you pay the correct FICA taxes (Federal Insurance Contributions Act) on these amounts.
Who Needs to File IRS Form 4137?
Not everyone who receives tips must file Form 4137. It’s required 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.
- Your Form W-2 shows allocated tips in Box 8 that you must report as income.
This form is common among service workers like servers, bartenders, hairstylists, delivery drivers, and gig economy participants (e.g., rideshare or food delivery apps). If you’re self-employed, you might report tips differently, but employees in tipped occupations are the primary users.
Exceptions include:
- Tips under $20 per month per employer, which aren’t subject to FICA taxes (though they may still be taxable income).
- Tips from railroad retirement (RRTA) employment, which are reported directly to the employer.
If you’re married filing jointly, each spouse with unreported tips must file a separate Form 4137.
How to Report Tips Properly to Avoid Form 4137?
To minimize the need for Form 4137, maintain accurate tip records and report them to your employer. Employees should:
- Keep a daily tip record using Form 4070A (Employee’s Daily Record of Tips) or a similar log.
- Report tips monthly to your employer using Form 4070 (Employee’s Report of Tips to Employer) by the 10th of the following month (or the next business day if it falls on a weekend or holiday).
- Include all cash, charge, and non-cash tips (e.g., tickets or gift cards).
Employers withhold taxes on reported tips, but unreported ones require self-calculation via Form 4137. Publication 531, “Reporting Tip Income,” provides detailed guidance on recordkeeping.
Step-by-Step Guide to Filling Out IRS Form 4137
Filling out Form 4137 involves gathering your W-2 forms, tip records, and employer details. Here’s a breakdown based on the 2025 form:
Header Information
- Enter your name and Social Security number.
- If married, note that separate forms are needed for each spouse.
Line 1: Employer Details
Use the table to list up to five employers:
- Column (a): Employer name from Form W-2.
- Column (b): Employer Identification Number (EIN) or “Applied For.”
- Column (c): Total cash and charge tips received (including timely, late, unreported, allocated, and under-$20 tips).
- Column (d): Tips actually reported to the employer.
If you have more than five employers, attach a statement with additional rows.
Key Calculation Lines
Use this table for a quick reference to the form’s calculations:
| Line | Description | Formula |
|---|---|---|
| 2 | Total tips received | Sum of Line 1, Column (c) |
| 3 | Total tips reported to employer(s) | Sum of Line 1, Column (d) |
| 4 | Unreported tips | Line 2 – Line 3 (report as income on Form 1040, Line 1c) |
| 5 | Tips under $20/month not reported | Enter amount (excluded from FICA taxes) |
| 6 | Unreported tips subject to Medicare tax | Line 4 – Line 5 |
| 7 | Maximum Social Security wage base | $176,100 (for 2025) |
| 8 | Total Social Security wages/tips from W-2 (Boxes 3 and 7) + RRTA compensation | Capped at $176,100 |
| 9 | Remaining Social Security base | Line 7 – Line 8 (0 if negative) |
| 10 | Unreported tips subject to Social Security tax | Lesser of Line 6 or Line 9 (adjust for government employees: subtract and note “1.45% tips”) |
| 11 | Social Security tax | Line 10 × 0.062 |
| 12 | Medicare tax | Line 6 × 0.0145 |
| 13 | Total tax due | Line 11 + Line 12 (report on Schedule 2, Form 1040, Line 5) |
For high earners, Additional Medicare Tax (0.9%) may apply—use Form 8959.
Special Timing Rules
- Timely reported tips (by the due date) are included in the report month/year.
- Late reports are based on the earned month/year.
Attach the completed form to your tax return and pay any taxes due by the filing deadline (typically April 15).
Recent Updates for the 2025 Tax Year
The One, Big, Beautiful Bill Act, signed into law on July 4, 2025, introduces significant changes for tipped workers. For tax years 2025 through 2028, you may deduct up to $25,000 in qualified tips from your income if they are reported on Form W-2, 1099 series, or directly on Form 4137. This “no tax on tips” deduction applies to occupations where tips are customary, such as waitstaff, bartenders, and gig workers.
Key details:
- Deduction phases out for modified AGI over $150,000 ($300,000 for joint filers).
- For self-employed, it can’t exceed net business income.
- Use tips from W-2 Box 7, Form 4070 reports, or Form 4137 Line 4 to calculate.
There are no other structural changes to Form 4137 as of January 2026. Always check IRS.gov for the latest revisions.
Common Mistakes and Tips for Accuracy
Avoid these pitfalls:
- Underreporting allocated tips, which can trigger a 50% penalty on unpaid taxes unless reasonable cause is shown.
- Forgetting to include unreported tips as income on Form 1040.
- Miscalculating the Social Security wage base.
Pro tips:
- Use electronic filing for accuracy.
- Keep detailed records to dispute allocated tips if they’re overstated.
- Consult Publication 531 or a tax professional for complex scenarios.
Related Forms and Resources
- Form 1040/1040-SR: Main tax return where Form 4137 attaches.
- Form 8959: For Additional Medicare Tax.
- Form 8919: Uncollected Social Security and Medicare Tax on Wages.
- Publication 531: In-depth tip reporting guide.
For nonresidents or Puerto Rico residents, use Form 1040-NR or 1040-SS/PR.
Final Thoughts on IRS Form 4137
Navigating unreported tip income doesn’t have to be overwhelming. By using IRS Form 4137 correctly, you ensure your taxes are paid, your Social Security credits are accurate, and you can take advantage of new deductions like the 2025 “no tax on tips” provision. Download the latest Form 4137 PDF directly from the IRS website: https://www.irs.gov/pub/irs-pdf/f4137.pdf. If you’re unsure about your situation, seek advice from a certified tax advisor to avoid penalties and optimize your return. Stay compliant and informed—your future self will thank you!