: If you received $20 or more in cash and charge tips in any calendar month and did not report the full amount to your employer .
For more specific guidance, you can review IRS Publication 531 on reporting tip income .
IRS is the tax document used to calculate and report the Social Security and Medicare taxes owed on unreported tip income . This includes cash tips, noncash tips, and "allocated tips" shown in Box 8 of your Form W-2 that were not previously reported to your employer . Core Purpose of Form 4137
: Failure to report required tips to your employer can lead to a penalty equal to 50% of the Social Security and Medicare taxes due on those tips .
: Filing ensures this income is credited to your Social Security record, which directly affects the calculation of your future retirement and disability benefits .
: The form applies a 6.2% Social Security tax (up to a wage limit, such as $176,100 for 2025) and a 1.45% Medicare tax on every dollar of unreported tips .
: It determines the employee's share of FICA (Social Security and Medicare) taxes on tips that weren't taxed during the year .
: The completed form must be attached to your annual income tax return . The calculated tax is typically reported on Schedule 2 (Form 1040) . Consequences of Non-Compliance