If I have no income for last year or this year, do I have to file income tax return?

Question

I am 44 and have been unemployed for the calendar years '05 and '06 and had no earned income. I had to to withdraw all of my pension money to keep up with my living expenses. At year end for '05 and '06, I received 1099's for my pension distribution which showed the gross distribution plus the amount of tax withheld. Also, my father, who is retired, can claim me as a dependent on his return. He helped pay for all of my living expenses and my mortgage. I have not filed for those respective years. Do I need to file a return? Finally, there was approx $2500 in taxes withheld on those 1099's as a result of the pension distribution. Should I file anyway to get a refund even if I don't have to file?

Answer 1

Yes, you need to file as you DO have taxable income. The early distribution is fully taxable. Since you withdrew prior to age 59 1/2 there is a 10% penalty tax on top of that. Even if your total income is below the amount where you'd have a tax liability there is no way around the 10% penalty tax.

You probably cannot be claimed as a dependent by your father as you almost certainly had more than $3,300 in gross income from those early distributions. How much support he paid isn't a factor if you have more than $3,300 in gross income.

If you didn't file for 2005 you may well owe penalties and interest for late filing and late payment of tax. If you get your 2006 return in by April 17th you won't have a penalty for late filing this year but may still have a tax liability.

Answer 2

You'll need to get the forms for 2005 and file your 2005 information on those - you can download them at irs.gov. You'll have to mail it - too late to efile for 2005. Do it as soon as possible. If you owe money, there will be interest and failure-to-file penalties, but they'll keep adding up until you file and pay what you owe. If you have a refund coming, you'll still get it and won't be penalized. And don't panic - to the IRS, this is not an unusual situation. File your 2006 return as you normally would.

Answer 3

You have income, just not EARNED income - yes, you have to file. And you don't say how much you took out in pension money, but don't count on getting back all that you had withheld there. Besides income tax, you'll owe penalites there for early withdrawal.

Your dad probably CAN'T legally claim you as a dependent, since it sounds like your gross income (yes, those pension withdrawals would count) would take you over the limit (gross income test) for him to claim you.

Answer 4

Yes you'll still need to file.