How is it possible for you to owe the IRS money if you were unemployed during that tax year?

Question

I was unemployed during the 2006 tax year. I did not file a tax return for that year. I just recieved a bill owing the IRS taxes with penalty charges. How is it even possible I would owe the IRS money if I did not even work that year to have a W-2. I was not self-employed either.

Answer 1

did you receive unemployment ?  If so, that is why.  You still need to pay taxes on earnings made by unemployment. If not, I have no idea.

Answer 2

If you received unemployment at all for the year then you would have to pay taxes on that because they don't usually withhold them. Otherwise I don't know, you would have to contact the IRS for info.

Answer 3

Unemployment is taxable.

Edit- Did you have any income for 2006?

Answer 4

Contrary to another answer, you are not required to file a return if your income was below a certain amount. What possibly happened is that someone else used your Social Security number and didn't file a return. The IRS then filed a return for you using the information they received from employers. Another possibilty is that someone used your SSN and did file, but later on the IRS determined that not all income was reported and assessed additional taxes. The best bet is to simply call the number on your notice and find out what happened. If it was identity theft, they have specific procedures for you to take to clear this up.

Answer 5

There are a lot of possible reasons.  You probably got notified of this via a CP-2000 notification.  If you read it closely, it will tell you how they came up with the bill.  If you still do not understand it, just call the 800 number they have on their and ask.  It may be as simple as some employer, ABC Corp, getting a social sec number wrong on an employee's w-2 and using yours by accident.  The IRS receives this and thinks you are hiding income from ABC Corp and sends you a bill saying we caught you.  You only have to explain that you never worked for ABC Corp.

Answer 6

Apart from possible tax on unemployment payment you may have received during that year, you may have an unpaid tax debt carried forward from a previous year. This only goes to show that in our rather complicated tax system, it is best to file an "income" tax return for every year, whether you were working or not. The emphasis is on the word income. It does not matter to the tax authorities whether the income was earned by working, or not.

Answer 7

Regardless of whether you were employed or not, whether you received unemployment benefits or not, whether the taxes were already withheld or not, you MUST file a tax return.

Remember, filing a tax-return is not always because you owe taxes. If you do not owe taxes, you still have to file the return to say "I do not owe you taxes".

If you are a US citizen or you live in US, every year you must file a tax return. It is a MUST.

No, I am not from the IRS.:-) Just another tax payer just like you.

Answer 8

You were not employed or self-employed, but did you have income?  Do you have investments, did you sell property, were you receiving disability payments, did you receive alimony, do you have rental property?  

Rather than guessing, take the IRS correspondence to a tax person for review so that you understand it.