The CARES Act made the self-employed, including freelancers, eligible for unemployment benefits under a program called Pandemic Unemployment Assistance. Here’s what you need to know.
If your small business isn’t bringing in any money right now or you have seen a steep decline in revenue, you may wonder if you can qualify for unemployment benefits.
Traditionally, it’s been very difficult for business owners to get unemployment. The coronavirus situation changed all of that.
The Coronavirus Aid, Relief and Economic Security (CARES) Act made the self-employed, including freelancers, eligible for unemployment under a program called Pandemic Unemployment Assistance. Freelancers can get both full benefits or if they are working reduced hours, partial benefits.
Providing up to 46 weeks of benefits (up from the original 39 weeks offered in the law under a recent extension), Pandemic Unemployment Assistance started Feb. 2 and runs through Dec. 26. To get this benefit, freelancers must apply for unemployment through their state department of unemployment.
Another program that added to state unemployment benefits is Pandemic Additional Compensation. It gave workers an additional $600 a week, on top of what the state paid in unemployment. It ended in late July, and Congress has not extended it.
President Trump passed an executive order in August that allows the unemployed to collect an additional $400 a month, on top of their state benefit. As of this writing, 40 states have received federal approval to offer the $400 a week. To check if your state is one of them, check FEMA’s website. South Dakota has announced it will not apply for the assistance.
Am I eligible for unemployment benefits?
There’s a wrinkle to getting this benefit, even if your state has gotten the approval. To be eligible, you must qualify for at least $100 a week in state benefits. So, for a worker to get the $400 a week, the state must pay $100 on top of the $300 the federal government now offers.
That is a departure from how the $600 benefit was administered. The unemployed only had to be eligible for $1 a week in state benefits to get the additional $600 a week.
This program extends through the work weeks ending Dec. 27, but could end earlier if funds run out or legislation offering additional federal unemployment aid passes.
Not all states want to pay the additional $100 a week to the unemployed. Some have said their budgets are already strained. Keeping an eye on the headlines in the next few weeks is a good idea if you need unemployment.
As of Aug. 31, six states – Arizona, Louisiana, Missouri, Montana, Tennessee and Texas – began paying out the $300 weekly increase, CNBC reported.
There’s another challenge for freelancers. Many have found it hard to get approved by state unemployment systems. Many states have outdated computers that have been hard to re-program to take into account self-employed workers.
Beyond that, unemployment policies in many states are outdated and don’t take into account the many ways people earn a living today.
Mixed-income earners face challenges, too
One group that has had trouble getting approved for unemployment is “mixed-income earners” – people who earn some of their income from a job and some from freelance work.
Both parties have recently proposed bills that would make mixed-income earners eligible for pandemic unemployment assistance, but neither has passed yet.
If you can make it through your state’s unemployment system, keep in mind that unemployment payments are taxable income and plan accordingly. Depending on your state, you may have to pay federal, state and local taxes on them.
You don’t have to pay Medicare or Social Security taxes on them though. The Freelancers Union recently published an article looking at the tax implications, and it’s worth reading.
The upshot? Yes, freelancers and the self-employed are eligible for unemployment assistance, but be prepared to navigate a few challenges if you apply.