This form is used if you’re an employee who received cash tips that total $20 or more in a month and didn’t report them to your employers.
Tip income is subject to Social Security and Medicare taxes. You’re supposed to report your monthly tip income to your employers. However, if for some reason you didn’t report it to your employers, you’d be responsible for reporting this income to the IRS using this form.
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Line 1: Lists your employers (if more than one) and the total amount of tips received from each, as well as how much of those tips you reported to each employer. You'll need to know each employer's identification number.
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Line 2: Sum of all the tips you received in 20XX.
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Line 3: Sum of all the tips you reported to your employers in 20XX.
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Line 4: Calculations of the amount in Line 3 from the amount in Line 2. This is the amount of unreported tips that you must report as income on your tax return.
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Line 5: List any tips that you didn't report to your employer because they were less than $20 in a single calendar month.
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Line 6: Calculations of the amount in Line 5 from the amount in Line 4 to calculate the amount of unreported tips that are subject to Medicare tax.
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Line 7: Shows the maximum amount of wages (including tips) that are subject to social security tax.
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Line 8: Total amount of your wages and tips that were already subject to social security tax (this information is found on your W-2 form).
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Line 9: Calculations of the amount in Line 8 from the amount in Line 7.
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Line 10: The smaller amount between Line 6 and Line 9. This is the amount of unreported tips that are subject to social security tax.
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Line 11: Calculation of the amount in Line 10 by the social security tax rate to calculate the additional social security tax you owe.
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Line 12: Calculation of the amount in Line 6 by the Medicare tax rate to calculate the additional Medicare tax you owe.
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Line 13: Total of the amounts in Line 11 and Line 12. This is the total additional tax that you owe and should be included in your tax return.
The total tax calculated on Form 4137 is then reported on your Form 1040 (or whichever form you use to file your income tax return). This will increase your total tax liability for the year.