Form 4137 for Underreported Tips: What You Need to Know
Personal Finance Editor · 7/12/2026
To file Form 4137 for underreported tips, you must have underreported tip income on your tax return. You can use Form 4137 to report unreported tip income and avoid penalties and interest, but only if you underreported tip income on your tax return, and the primary keyword is "form 4137 for underreported tips".
Do I Need to File Form 4137 for Underreported Tips?
You must file Form 4137 if you underreported tip income on your tax return. Underreported tip income is any tip income you received but didn't report on your tax return. This includes tips from customers, but excludes tips from non-cash sources such as merchandise or travel. According to the IRS, “tips are considered wages and are subject to federal income tax withholding” (https://www.irs.gov/forms-pubs/about-form-w-2).
- Any tip income you received but didn't report on your tax return,
- Tips from customers, but excludes tips from non-cash sources such as merchandise or travel,
Form 4137 is used to report unreported tip income and avoid penalties and interest. The IRS may impose penalties and interest on unreported tip income, and you may also lose the No Tax on Tips deduction if you don't file Form 4137. According to the Treasury Department, “the No Tax on Tips deduction phases out above $150,000 Modified Adjusted Gross Income (MAGI) ($300,000 married filing jointly)” (https://home.treasury.gov/).
What Happens If I Don't File Form 4137?
If you don't file Form 4137, you may face penalties and interest on unreported tip income. The IRS may also adjust your tax return to include the unreported tip income, and you may also lose the No Tax on Tips deduction. According to the IRS, “the penalty for failing to file a tax return is a minimum of $205, or 100% of the unpaid tax, whichever is greater” (https://www.irs.gov/tax-professionals/individuals-and-businesses/penalties-for-failing-to-file).
- Penalties and interest on unreported tip income,
- The IRS may adjust your tax return to include the unreported tip income,
- You may lose the No Tax on Tips deduction.
The No Tax on Tips deduction caps at $25,000 of qualified tips per year, and phases out above $150,000 MAGI ($300,000 married filing jointly). This means that if you don't file Form 4137, you may not be eligible for the No Tax on Tips deduction. According to the Treasury Department, “the No Tax on Tips deduction applies to tax years 2025–2028” (https://home.treasury.gov/).
How to File Form 4137 for Underreported Tips
To file Form 4137, you must gather the form and any supporting documentation. You should complete Line 1 with the amount of unreported tip income, and attach Form 4137 to your amended tax return (Form 1040X).
- Gather Form 4137 and any supporting documentation,
- Complete Line 1 with the amount of unreported tip income,
- Attach Form 4137 to your amended tax return (Form 1040X).
You can use Form 4137 to report unreported tip income and avoid penalties and interest. The form is used to calculate the tax due on unreported tip income, and to report any penalties and interest. According to the IRS, “Form 4137 is used to report unreported tip income and avoid penalties and interest” (https://www.irs.gov/forms-pubs/about-form-4137).
Alternatives to Form 4137: What to Do If You Can't File
If you can't file Form 4137, you may need to file an amended tax return (Form 1040X). You may also need to file Form 2210 to report penalties and interest. According to the IRS, “Form 2210 is used to calculate the interest on tax due” (https://www.irs.gov/forms-pubs/about-form-2210).
- File an amended tax return (Form 1040X),
- File Form 2210 to report penalties and interest.
If you are unsure about filing Form 4137 or need guidance on your specific situation, you should consult a tax professional. They can help you determine if you need to file Form 4137 and assist you in completing the form. According to the IRS, “tax professionals can help you navigate the tax code” (https://www.irs.gov/tax-professionals/individuals-and-businesses).
Key Takeaways
Key takeaways
- You must file Form 4137 if you underreported tip income on your tax return.
- Form 4137 is used to report unreported tip income and avoid penalties and interest.
- The No Tax on Tips deduction caps at $25,000 of qualified tips per year, and phases out above $150,000 MAGI ($300,000 married filing jointly).
Frequently Asked Questions
What is the deadline to file Form 4137?
The deadline to file Form 4137 is typically the same as the deadline to file your amended tax return (Form 1040X).
Can I e-file Form 4137?
No, Form 4137 cannot be e-filed. You must mail it to the IRS.
What is the penalty for failing to file a tax return?
The penalty for failing to file a tax return is a minimum of $205, or 100% of the unpaid tax, whichever is greater.
Note: This article is informational only and should not be considered tax advice. You should consult a tax professional for guidance on your specific situation.