Form 4137 ("Social Security and Medicare Tax on Unreported Tip Income") is the cleanup form for tips that should have been reported to your employer but weren't. The employer normally withholds FICA on reported tips through your paycheck; Form 4137 lets you pay that FICA directly to the IRS at tax time on tips your employer never knew about.
When you need Form 4137:
- You earned cash tips your employer never saw (a common situation in cash-heavy bars, valet, and casino floor work).
- Your W-2 Box 8 shows allocated tips — the IRS-mandated "minimum tip" your employer assigned based on the restaurant's sales.
- You under-reported tips on the daily slip and want to come clean before an audit.
The form calculates FICA owed (7.65% on the unreported amount). The amount flows to your Form 1040 and you pay it with your return.
Filing Form 4137 does NOT automatically trigger an audit. The IRS treats it as a self-correction. The opposite — under-reporting tips and getting caught — does trigger penalties and interest.
Example
A valet earns $80/night in cash tips at a hotel but only reports $30 to the front desk. At year-end the W-2 shows $30 × shift count. The valet files Form 4137 to declare the remaining cash tips and pay the missing FICA.