Yes, you can estimate it as long as you have reasonable data that you can substantiate should you need it. Review the steps below for including those tips and paying your social security and medicare tax on those tips. The following links are about the new One Big Beautiful Bill Act (OBBBA) regarding tips for 2025. For 2026, the employer must report these on your W-2.
How to enter your unreported tips on your tax return:
- After entering your W-2, look for the Let's check for other situations screen.
- Check the box next to Tips not reported on my W-2.
- Answer our follow up questions and TurboTax will automatically create Form 4137, Tax on Unreported Tip Income.
- Finish your return as usual, but do not e-file it. It must be printed and mailed.
- Create an explanatory letter for the IRS. Your letter should mention that:
- Your employer didn't include the full amount of tips on your W-2.
- You kept records of your tips and did not report them to your employer.
- Include the letter with your return when you mail it to the IRS. (Be sure to keep a copy of the letter with your tip records and a copy of your tax return.)
- The IRS will then contact your employer about collecting payroll taxes.
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