What if I reported tips to my employer, but my employer didn't include them on my W-2?
If your employer didn't include your tips on my W-2, ask them for a corrected W-2 (Form W-2C) that includes your tips.
If your employer refuses your request, they may be trying to avoid paying payroll taxes on the omitted tips. Let them know you'll send an explanatory letter to the IRS so you don't get stuck paying your employer's payroll taxes.
If your employer still won't report your tips, you can follow these steps to file a Form 4137.
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 followup 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:
You reported the correct tips to your employer.
Your employer didn't include the full amount of tips on your W-2.
Your employer refused to issue a corrected W-2.
You kept records of your tips.
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.
