I have a confusing tax situation,please help!!?

Question

I was paid 4000.00 from unemployment compensation in 2006 and have a w2 from 2005(that I did not use when I filed 2005 taxes last yr). The W2 states that I made $170.00, and paid $10.54 in SS tax along with $2.47 in Medicare tx. As for the U.C, I never opted to have taxes tooken out of my UC benifits check ,so I am assumming I will have to pay taxes. I am very confused, I do not know If I am eligible to receive earned income credit. I am not even sure if I am eligible to file taxes for 2006.
F.Y.I. I did not work in 2006, the W.2 I am referring to is from a job I worked 1 day at in 2005. When I filed my taxes last yr I did`nt get this w2 in time so I just filed w/o it. I am hoping that having this will some how save me from having to pay unemployment taxes and possibly get my Earned income credit..
Any and all answers are very much appreciated and welcomed!!
There are no stupid answers just as there are no stupid questions!! Thank you and have a wonderful and safe weekend...

Yes, I do have dependents(4)..I know you can only use 2 for EIC,but the other two are considered as a deductable..
So I am guessing that this will taken into consideration when I find out how much I owe in taxes for the unemployment..
B.T.W..I am not late paying taxes to the IRS, since I owe the taxes for 2006 not 2005. I was just hoping that I could have some how included that one little W2 from 2005 when filing to see how much I owe for Uunemployment. I thought maybe it would work out where I would actually make out with something. Now I am also wondering will I be eligible for My Pa sales tax return that they started a few yrs back..I am so mad at myself for not working after my unemployment was exhausted..Then everything would have worked out perfectly..

Answer 1

You really need to file an Amended return (1040X) to include that unemployment income on your 2005 tax return. It's only a matter of time before the IRS catches it. And they always catch taxpayers who leave off unemployment. Unemployment income isn't earned income, so it won't raise your earned income credit. Earned income credit is based on earned income from W-2's or self employment income, for example.

Answer 2

Eventually, probably sometime this year, you'll get a letter from the IRS reminding you that you didn't file that 2005 W-2 and telling you how much extra tax you owe because of it, and telling you to send them that much or explain why they're wrong. On $170, it shouldn't be very much, but since you don't mention anything being withheld from it for federal income taxes, will be something. And having the left-over W-2 from 2005 will have no effect on your 2006 taxes, either positive or negative.

As to this year, the return for the 2006 tax year that you'll be filing soon: you won't be eligible for the EIC since you didn't have earned income. Your unemployment comp is taxable income, but if that's your only income, might not end up with you owing anything. You don't say what your filing status or marital status is. If you're single, since the unemployment comp total was under $8450 and was your only income, you won't owe anything. If you're married filing either jointly or separately, you'll have to report it and can expect to owe some taxes on it.

Answer 3

Ok first your 2005 and 2006 taxes cannot be combined. You would need to fill out an amended 2005 return for the 2005 w-2.

Unemployment is not considered income you earn, so no you cannot get the EIC based on just unemployment. You do have to file taxes on unemployment. If you did not opt to have taxes taken out of your unemployment, than you will more than likely end up paying in (depending on your dependent situation)

Answer 4

I agree with everyone here. Income made in 2005 is only good for 05 taxes and not 06. You'll have to file an amended return for 2005 to claim that money.

Your unemployment for 2006 is taxable so you need to file taxes on it--but unemployment does not count for the EIC. If you did not make other income in 2006 besides unemployment, you will not qualify for the EIC. Sorry.

Answer 5

You will have to file an amended return for 2005. See the following site for details on how to do that:
http://www.irs.gov/faqs/faq1-3.html

As for this year - you can only receive earned income credit if you have actual earned income. If you only received $4000 for unemployment - the amount of taxes that you owe should be negligible.

I don't know if you have dependents or not. If you do that could help your tax situation considerably.

I hope this information is helpful. Make sure you check out the IRS site - and you can also call their 800 number for tax assistance.

Best wishes!

Answer 6

You can't use the W2 from 2005 for your 2006 taxes. If you want to use it, you need to file an amendment to your 2005 return. I doubt you can claim the earned income tax credit since you didn't actually earn any income. If 4000 is your entire income for 2006, then you don't actually have to file taxes. If you made less than 5150 (I think is the figure) you have no tax liability. Since you didn't have any withheld, there is no reason to file.

Answer 7

you should amend your 2005 return to reflect the extra income, you may have to pay for 2005. It sounds like they did not withhold any tax from your 170.00...medicare etc. doesn't count. your 2006 income is not earned and therefore, you will not receive EIC. You should file in order to pay taxes due on the unemployment.

Answer 8

I think your 2005 paperwork relates only to 2005. For 2006, try an online free tax prep software (www.taxact.com) and find out your 2006 status.