If you receive more than $20 a month from tips, that income is subject to withholding, too. You report the tips to your employer, who takes them into account when figuring how much to withhold from your wages. Form 4137 is for reporting tip income that was not reported to your employer and therefore did not show up in your W-2 income.
Because Congress is concerned that a lot of tip income goes unreported, there are special rules to encourage voluntary compliance. Basically, the law assumes customers tip at an average rate of 8%. If restaurant and bar employees don't report to their employer tips totaling at least 8% of the establishment's gross receipts, the employer has to do it for them.
The shortfall between what's reported to the employer and the 8% level is allocated among the employees—but only for the purpose of a report to the IRS. No money will change hands, and waiters and waitresses are still expected to report their actual tip income, whether it's more or less than their share of the 8% kitty. Those who report less, however, should be more prepared than ever for questions from the IRS. (The tip-allocation rule applies only to establishments with ten or more employees where tipping is customary.)