Some citizens get their primary income not from hourly wages or salaries but from tips. These amounts often exceed hourly wages and should also be subject to taxation. If you belong to this social category, you should learn about Form 4137.
Often, the managers ask the workers who get significant income share in tips to indicate their total monthly amounts because they are expected to withhold taxes from it (for Medicare and Social Security purposes, for instance). If you do not report your monthly income from tips, you will need to fill out and submit Form 4137 to the Federal Revenue Service.
Using this report, the employer executes an estimation of the additional tax assigned for unregistered income, in this case, from the tips.
Typically, those groups of citizens who get tips (waiters, beauty salon workers, gas station workers, and others) receive hourly wages in addition to tips. The employer withholds taxes from the wages and the tips you report to them.
But often the tips are so impressive that they exceed the salary. In this case, it is required to pay the difference in tax from tips.
This form must be submitted by employees who are tipped and have not informed their management about it. There are several features to this rule:
You must inform about earned tips your company on the 10th of each month following the month you got the tip.
The paper under review is used to report any tip income that appears in box 8 of your Form W-2. If the tip income taxes have not been withheld in the current financial period yet, you must complete this form if you:
It is highly recommended to keep a daily record of your tips so that if there is any disagreement in the data submitted by you and your employer, you can have your notes and be able to present them.
We recommend using our form-building software and developments to get the relevant form template and edit it online by inserting the necessary information. But you can also refer to the official IRS website.
We have outlined an illustrated form compilation guide for you to make the filing process a bit easier. Please refer to it below.
Enter Your Details
Start filling out the form by filling in your full name and Number of Social Security.
Fill in the Tip Information
If you work for several companies, then the data on each must be provided separately.
You must specify the following data:
List All Tips For 2019
You need to add up all tips earned in 2019. This should include tips:
Enter the Tip Amount Reported to the Employer
You can rewrite the number from your W-2.
Calculate the Sum of Additional Tips
Following the instructions for calculations, you will receive the amount for which you must calculate taxes.
Get the Sum That Is Subject to Medicare Tax
On point 5, enter the tip amount that was less than $20 per month. Then subtract the metrics as written on line 6 and write down the result.
Point 7 is already filled in; you do not need to touch or change it.
Get the Amount That is Subject to Social Security Tax
Enter in point 8 the result of the addition of all wages you specified in W-2.
Enter in point 9 the result obtained by subtracting the indicated values. If you get a negative number, then write in zero. Then compare the indicators from points 6 and 9, and you should enter the lower number in point 10.
Get Tax Amounts
By following the instructions on points 11 and 12, you will receive the exact tax amounts. On point 13, you will receive additional taxes, which must be reported on the rest of the documents.
It is very important to provide accurate information about your income, including tips. Some people may think that it is enough to simply hide the tip literally in your pocket because it is usually cash. But this is not the case. The IRS can check. For example, check your bank accounts for the arrival of money. Or compare the data you show with the data of your colleagues. They may have questions, and in this case, it will be very difficult to avoid fines.