Form 4137: Social Security and Medicare Tax on Unreported Tips
Published November 5, 2026
Tips are income. If you got cash or charge tips and did not report all of them to your employer, you owe income tax on the unreported part. You also owe Social Security and Medicare tax on it. Form 4137, Social Security and Medicare Tax on Unreported Tip Income, is where you figure that tax. IRS: About Form 4137
The $20 rule
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. The $20 rule applies to each employer. If you worked for two employers in the same month, you count the tips from each job separately. IRS: Form 4137 (2025)
Reporting tips to your employer
If you get $20 or more in tips in a month, you must report 100% of them to your employer in writing. The report is due by the 10th day of the next month. If the 10th is a Saturday, Sunday, or legal holiday, the report is due the next business day. Tips paid by credit card or debit card count as cash tips for this rule. IRS: Form 4137 (2025)
Allocated tips on your Form W-2
Your employer may show allocated tips in Box 8 of your Form W-2. Those tips are not in Box 1, and no tax was withheld from them. You must report allocated tips as income. The exception is when you have records that show your unreported tips were less than the Box 8 amount. In that case, include the Box 8 amount on Form 4137. IRS: Form 4137 (2025)
How the form works
Line 1 lists each employer and the tips you received and reported. Lines 2 through 4 add up the tips and find the amount you did not report. That amount is income, and it goes on Form 1040, line 1c. Lines 6 through 13 figure the tax. Social security tax is 6.2% of tips, up to the 2025 wage limit of $176,100. Medicare tax is 1.45%. The total goes to Schedule 2 (Form 1040). If you must also file Form 8959, enter the line 6 wage amount on its line 2. IRS: Form 4137 (2025)
Late reports count in the year you earned them
Tips reported to your employer late are income in the month and year you earned them, not the year you reported them. The IRS gives the example of December tips that were reported in January. Those tips belong on the earlier year's Form 4137. IRS: Form 4137 (2025)
Do not use Form 4137 for pay you were not paid as an employee
If your employer treated you as an independent contractor, Form 4137 is the wrong form for the Social Security and Medicare tax on that pay. Use Form 8919 instead. See Form W-2 boxes and pay stub checks to find the amounts on your W-2. The income tax deduction for tips is a separate topic. See no tax on tips and overtime.
Records to keep
- A daily or weekly tip log with the date, the amount, and whether each tip was cash or card.
- Copies of your written tip reports to your employer, with the dates you gave them.
- Your Forms W-2, including Box 8 for allocated tips.
Steps to follow
- Total the cash and charge tips you got each month from each employer.
- Find the months where the total was $20 or more.
- Compare what you reported to your employer with what you received.
- Complete Form 4137 for the unreported amount, and carry the results to your return.
General information, not advice for your situation.
Sources: Sources: IRS, About Form 4137, Social Security and Medicare Tax on Unreported Tip Income (https://www.irs.gov/forms-pubs/about-form-4137); IRS, Form 4137 (2025) with instructions (https://www.irs.gov/pub/irs-pdf/f4137.pdf) This is general information, not advice about your specific return.
