What this line means
The Social Security tax you owe on unreported tips, calculated by multiplying line 11 by 6.2% (the employee share of Social Security tax). When you report tips to your employer, the employer withholds this tax from your paycheck. For unreported tips, you pay it directly through Form 4137, which flows to your Form 1040.
Does this apply to you?
- You have unreported tip income and your total earnings have not exceeded the Social Security wage base
- You owe the employee share of Social Security tax on tips your employer could not withhold
- You are completing Form 4137 to calculate FICA taxes on unreported tips
Easy to overlook
You pay only the employee share, not both halves Social Security tax is 12.4% total, split equally between employer and employee. On unreported tips, you owe only the 6.2% employee share. Unlike self-employment tax (where you pay both halves), Form 4137 charges you the employee rate because the employer relationship exists — the tips just were not reported through payroll. 1 IRS Form 4137 instructions — Line 12
This tax is in addition to income tax on the same tips The Social Security tax on line 12 does not replace income tax. Your unreported tips are also taxable income on Form 1040. A server with $5,000 in unreported tips owes $310 in Social Security tax here, plus income tax at their marginal rate, plus Medicare tax on line 13. The total tax impact is higher than many filers expect. 2 IRS Publication 15 — Employer’s Tax Guide
Watch out for this
Applying the wrong tax rate. The employee Social Security tax rate is 6.2%, not 12.4% (the combined rate) and not 15.3% (the self-employment tax rate). Using the wrong rate either doubles your tax or includes Medicare tax that belongs on line 13. Line 12 is strictly 6.2% times line 11.
Footnotes
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IRS Form 4137 Instructions, Line 12. https://www.irs.gov/instructions/i4137 ↩
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IRS Publication 15 (Circular E), Employer’s Tax Guide. https://www.irs.gov/pub/irs-pdf/p15.pdf ↩