What this line means
The Medicare tax you owe on unreported tips, calculated by multiplying line 5 (total unreported tips from all jobs) by 1.45%. Unlike Social Security tax, Medicare tax has no wage base cap — every dollar of unreported tips is subject to this tax regardless of how much you earned during the year. This amount combines with line 12 and flows to your Form 1040.
Does this apply to you?
- You have any unreported tip income during the year, regardless of amount
- You are completing Form 4137 and need to calculate Medicare tax separately from Social Security tax
- You owe Medicare tax on tips your employer could not withhold through payroll
Easy to overlook
Additional Medicare Tax applies above $200,000 If your total wages, tips, and self-employment income exceed $200,000 (single) or $250,000 (married filing jointly), you owe an additional 0.9% Medicare tax on the amount above the threshold. This Additional Medicare Tax is calculated on Form 8959, not on Form 4137. Unreported tips that push you over the threshold increase your Form 8959 liability. 1 IRS Form 8959 instructions — Additional Medicare Tax
Medicare tax applies to all unreported tips, not just the amount subject to Social Security tax Line 12 (Social Security tax) uses line 11, which can be reduced by the wage base cap. Line 13 (Medicare tax) uses line 5, the full unreported tip amount with no cap. Workers who hit the Social Security wage base still owe Medicare tax on every dollar of unreported tips. 2 IRS Form 4137 instructions — Line 13
Watch out for this
Using line 11 instead of line 5 when calculating Medicare tax. Social Security tax (line 12) uses the wage-base-limited amount on line 11, but Medicare tax uses the full unreported tip amount on line 5. There is no wage base for Medicare. Using line 11 understates your Medicare tax if you hit the Social Security cap.
Footnotes
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IRS Form 8959 Instructions, Additional Medicare Tax. https://www.irs.gov/instructions/i8959 ↩
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IRS Form 4137 Instructions, Line 13. https://www.irs.gov/instructions/i4137 ↩