How to Report Allocated Tips on Form 4137

Allocated Tips on Form 4137

Allocated tips are reported to employees in Box 8 of Form W-2. When employees in certain service jobs do not report their tip income, or do not report enough tip income to their employer, the employer may be required to report the difference as allocated tips on their W-2. Allocated tips represent amounts not reported by the employee to the employer. Tips that the employee has reported to the employer will show in Box 7 of Form W-2 as social security tips.

NOTE: Allocated tips are not required to be reported on the taxpayer’s tax return when the taxpayer keeps a daily tip record showing a lesser amount of tips were actually received. The smaller amount from the taxpayer’s records will be reported on Form 4137.

1. Click Add Form on the tax return toolbar. In the Enter Schedule/Form Number box, enter 4137. When you see FRM 4137 in the list, double click on it, and the program adds the form to the return.

2. On line 1 column A, enter the name of the employer.

3. On line 1 column B, enter the EIN of the employer.

4. On line 1 column C, enter the total tips received by the employee for that job. If the taxpayer does not have daily tip records showing actual tips received, the amount to be entered is the amounts in Box 7 plus Box 8 of Form W-2.

5. On line 1 column D, enter the tips reported to the employer from Form W-2 Box 7.

6. The program will add the unreported tips to line 7 of Form 1040, and the social security and Medicare tax owed on tips to line 57 of Form 1040.