Line 57 of Form 1040 is used by the IRS to ensure no taxpayer earnings escape the reach of Social Security and Medicare taxation. More specifically, Line 57 is the place for taxpayers to list any unreported earnings from tips (on Form 4137) and/or other wages (on Form 8919) that were not previously subjected to the two taxes.
Form 4137 – Tips: Taxpayers who received tips of $20 or more in any month, but failed to report the full amount to their respective employer(s), must complete Form 4137. The value of any non-cash tips, such as event tickets or membership passes, do not need to be reported on Form 4137 (Social Security and Medicare taxes do not apply to non-cash tip income). Once Form 4137 is completed, a taxpayer should transfer the Line 13 dollar amount to Line 57 of Form 1040.
Form 8919 – Other Wages: When an employer pays wages to its employees it is required to withhold a portion of the funds to pay Social Security and Medicare taxes. Unfortunately, some employers fail to properly withhold sufficient wages. As a result, the taxpaying employees, who are often caught off guard, are left to cover these taxes at year’s end. To do so, taxpayers must complete Form 8919. Once Form 8919 is completed, a taxpayer should transfer the Line 13 dollar amount to Line 57 of Form 1040. Additionally, taxpayers should ensure that the Form 8919 Line 6 amount is accurately included on Line 7 of Form 1040.
NOTE: Taxpayers may be charged with penalties of up to 50% of their Social Security and Medicare tax liability in the event the IRS discovers unreported tips and wages.
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