
Form 4137, Social Security and Medicare Tax on Unreported Tip Income
Quick guide on how to complete form 4137 social security and medicare tax on unreported tip income
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People also ask
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Do you have to pay Social Security and Medicare on tips?
All cash tips received by an employee in any calendar month are subject to Social Security and Medicare taxes and must be reported to the employer.
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Do you have to count tips as income?
Whether someone pays a tip with cash, check, debit card, or credit card, tips are considered income by the Internal Revenue Service (IRS) and are subject to federal and state taxes.
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How do you prove tip income?
When you're paid in tips, I highly recommend keeping a tip journal (yes, this applies to waitstaff and others who work for tips). Just jot down the amounts that you receive each week. If you keep excellent and contemporaneous records, the IRS will generally accept a tip journal as proof of compensation.
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How do I report unreported income?
Use Form 3949-A, Information Referral PDF to report alleged tax law violations by an individual, a business or both. You can report alleged tax law violations to the IRS by filling out Form 3949-A online.
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What happens if you don't report tips as income?
Penalty for not reporting tips. If you did not report tips to your employer as required, you may be charged a penalty equal to 50% of the social security, Medicare, and Additional Medicare Taxes due on those tips.
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What does uncollected Medicare tax on tips mean?
Code B – Uncollected Medicare tax on tips. This shows the employee Medicare tax or RRTA Medicare tax on tips that were not collected because the employee did not have enough funds from which to deduct it. Do not include this amount in box 6.
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Do you have Social Security and Medicare tax on unreported tip income?
Penalty for not reporting tips. If you don't report tips to your employer as required, you may be subject to a penalty equal to 50% of the social security, Medicare, Additional Medicare, or railroad retirement taxes you owe on the unreported tips.
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How do I report unreported tip income?
Use Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to figure social security and Medicare taxes and/or Form 8959, Additional Medicare Tax, to figure Additional Medicare Tax. Enter the tax(es) on your return as instructed, and attach the completed Form 4137 and/or Form 8959 to your return.
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