One year ago, the U.S. economy was still in turmoil due to the coronavirus pandemic. As of February 27, 18,2 million Americans had not yet filed for weekly unemployment benefits. 770,000 workers filed their initial unemployment claims during the week ending March 13. The unemployment rate has stabilized at 6.2%.
Many laid-off workers may not be familiar with the federal and state unemployment-benefits program. This joint state-federal program provides people out of work with cash payments that are temporary but steady to help them pay their bills while they search for a job.
Good news: Congress passed a new round of stimulus coverage earlier this month. This act, also known as the American Rescue Plan Act 2021, further extended the time period for people who have filed for unemployment benefits to continue receiving supplemental federal benefits every week.
We can help you navigate the complex unemployment-benefits system and get you the help that you need. The earlier you apply, the better.
Who is eligible for unemployment benefits?
Workers who aren’t working due to their fault, such as a layoff, can apply for unemployment benefits. You do not need to apply if you are fired due to misconduct or if you leave involuntarily or decline an offer of work.
When the coronavirus disrupted the economy for the first time in March 2020, Congress provided unemployment benefits to those workers who were not covered by the previous policy. These are the people who now qualify:
- Coronavirus measures can lead to temporary or permanent layoffs of workers
- Coronavirus measures have reduced the work hours of workers whose employers cut their hours
- Coronavirus has caused income loss for self-employed workers
- Coronavirus has rendered workers unable to work and have placed them in quarantine
- Coronavirus exposure renders workers unable to work
- Coronavirus renders workers unable to work while caring to a family member.
Every state, territory and district has its own guidelines regarding who is eligible to receive unemployment benefits. These guidelines also determine how much they will be paid. The criteria of your state for earning wages or working during a period is called a “base period.” This is typically the first four of the five most recent calendar quarters prior to the time your claim is filed. According to the U.S. Department of Labor, it is the period in which you meet the requirements. Some states have not updated their guidelines due to recent changes in law. You can apply now if you believe you are eligible.
According to the state, unemployment benefits are calculated on a percentage one’s earnings. They are paid weekly for a period between 12 and 28 weeks depending on what it is. The benefits have been extended by federal stimulus measures. You can read more about that below.
You may be eligible for unemployment insurance if you have received a severance package, usually from an employer you worked for. California and other states don’t prohibit you from receiving benefits if your severance payments are either in lump sums or in regular installments. Texas, however, prohibits you from being eligible for unemployment benefits if you are receiving severance pay.
How to apply for unemployment benefits
In light of the spike in claims made by the pandemic, it is important to contact your state’s unemployment program office as soon as you lose your job. You can check with the office for the best method to register in the system. Although it was once possible to do so in person (that’s how we got our “unemployment lines”), it is now a bad idea.
Remember that it takes time to register your claim for unemployment benefits, especially considering the COVID-19 pandemic. So budget accordingly before you receive your first payment. The U.S. Labor Department’s CareerOneStop website estimates that it takes between two and three weeks to receive your first benefit check. However, this estimate was made before the pandemic. Many state unemployment offices are still struggling to keep up with this spike in demand.
A one-week wait period is required by some states and the District of Columbia. You will file your first unemployment case (in which you list all the jobs that you applied for that week), but you will not receive any payments. Your first payment would be made to you in the second week of your unemployment case. Due to the recent pandemic, many states including New York, California, Hawaii, and New York have waived their waiting periods. The federal government will provide full funding for the first week of unemployment under the $1.9 trillion American Rescue Plan (more details below). For information about any changes in the waiting period, visit the website of your state.
How the latest Coronavirus Stimulus package changes the rules for unemployment benefits
The new $1.9 trillion American Rescue Plan Act 2021 was signed by President Joe Biden in March. It provides federal unemployment benefits payments of $300 per week to American workers who are not employed. This is on top of standard benefits levels, and will be available through September 6, 2021.
For households with incomes below $150,000, $10,200 in unemployment benefits will be exempted from tax. Note: The IRS is currently updating its software and tax forms for 2020 to reflect the new exemption. Do not rush to file an amended tax return if you have already filed your 2020 tax returns. Wait until the IRS issues instructions. You can find more information below.
Make sure you have all the paperwork in order before you file for unemployment benefits
Your unemployment claim will be processed faster if you’re prepared. And the representative who processes it will be happier. As if you were going to the Department of Motor Vehicles, gather supporting documentation. But with the promise of a paycheck.
It is not sufficient to have your Social Security number. But it is a start. Also, you will need to give the name, address, and dates of employment of your last employer. This is enough information for most people. Some states, like Utah require you to have a driver’s licence as proof of identity. You will need your Alien Registration number (the eight- to nine-digit USCIS Number) if you are not a U.S. citizen but legally authorized to work in America. Ex-military personnel should have their DD214 form handy. This is your certificate of discharge or release from active duty. If you don’t have one, you can request one through the U.S. Department of Veterans Affairs’ milConnect webpage. Ex-federal employees will need to submit either their Standard Form 8 or Standard Form 50 forms (SF-8), respectively. Documentation detailing your payout will be required if you are receiving or planning to receive severance pay. All qualified pension recipients must have all of their pension documentation.
How to calculate your unemployment benefits
Every state’s unemployment office has its own calculator that can help you figure out how much you will be receiving on a weekly basis. You can simply take the highest quarter of your base wages and divide it by the number weeks that the state gives you unemployment compensation. More complicated formulas may include additional factors.
For example, Massachusetts’ Department of Unemployment Assistance provides a unemployment benefits determination calculator where you can enter the total wages that you have earned in each quarter. The calculator calculates your weekly wages and the weeks that you will be receiving unemployment benefits (26 in the Bay State case).
These calculators are meant to help you calculate your benefits, but they are not intended for use. Your state’s computer system will ultimately crunch your numbers to determine your weekly amount. Don’t expect estimates, as benefits for self-employed workers are still a relatively new phenomenon.
Yes, unemployment benefits are taxed. Sorry!
Although it may not seem as shocking as hearing about your job loss, the fact that your unemployment benefits are subject to taxation can still be difficult to accept. Unemployment benefits are income and therefore, they can be taxed at the state and federal levels.
A tax break is available under the American Rescue Plan. This allows Americans who have received unemployment benefits in 2020 to be exempt from federal income taxes up to $10,000. You and your spouse can each exclude as much unemployment compensation as you want if you are married.
But there is one major question about this tax exemption. How do you claim it. Although the IRS has yet to provide an answer, it is working on it. The way you handle the new tax relief will depend on whether you have already filed your 2020 tax returns. The IRS has updated Schedule 1 (Form 1044) instructions and created a Unemployment Compensation Exclusion Worksheet to assist paper filers. The IRS is also working with tax software firms to improve their products in order to allow users to claim the exemption on 2020 tax returns. If you were awarded unemployment compensation last year you may want to delay using these software products for your 2020 tax return.
The IRS is currently working to issue refunds for the $10,000.0 exemption to taxpayers who have already filed their 2020 tax returns. If you have filed your 2020 tax return before the exemption was implemented, this would mean that you won’t need to file an amended return in order to claim the new tax relief.
Moreover, the federal government does not waive taxes on your first $10,200 in 2020 unemployment benefits. This doesn’t mean that your state will. While some states don’t tax or fully tax unemployment compensation, the majority do. To help those affected by the pandemic, however, there are a few states that exempt unemployment compensation for 2020 or 2021. Others are also adopting the $10,000.0 exemption for state tax purposes. Unemployment Benefits Taxes: A State by-State Guide . To find out how your state handles unemployment benefits, visit .
You have the option of having up to 10% of your weekly unemployment benefits withheld from federal taxes. The IRS will send a Form1099-G to taxpayers. This shows the amount received as well as the amount of federal income taxes that have been removed from your benefits. The IRS may withhold taxes from unemployment benefits upon request by the benefits claimant using form W-4V. However, others may have to make estimated tax payments throughout the year if they do not wish to have their taxes withheld.
Apply for unemployment benefits where you work, not where you live
Your claim should be filed in the state you worked. For example, residents of Maryland or Virginia who work in Washington, DC, must file their claim with that district.
For information about how to file a claim with other states if you have worked in more than one state, contact the unemployment office in the state where you live.
You can still get unemployment benefits even if you have some work
If you are still working full-time, you will not be considered unemployed and therefore not eligible for unemployment benefits. However, unemployment benefits are still available to you if you have lost one job and kept another or get paid for temporary work. To compensate for your additional income, however, the benefits will be reduced. Not just your take-home, but your gross wages must be reported each week.
Missouri’s partial unemployment benefits can be calculated as follows: Take your weekly wage and subtract $20 or 20% of the weekly benefit amount. This amount is your deduction. It is subtracted from your weekly benefits and then rounded down to an even dollar amount. This amount is subject to any withholdings for federal taxes or similar.
While state policies can vary, the general rule is that if you do part-time work or temporary work (which includes self-employment), you must still comply with your state’s requirement to provide a list of new job search each week. For example, the District of Columbia requires that you list two job applications per week. However, this requirement was suspended due to the coronavirus pandemic. Filers are not required to list more than one application at the moment. Your state wants you to be able to look for full-time work, and has the selfish goal to stop you from receiving unemployment benefits when you return to full-time work.
Budget for life on Unemployment Benefits
Once you have calculated the weekly unemployment benefits you will receive, it’s time to start planning for the next few weeks. “This is a good time to calculate your fixed and discretionary costs,” says Lisa Brown chief strategy officer of financial planning firm Brightworth. Brown suggests speaking to your mortgage company, if you are a homeowner, and contacting creditors, credit card companies included, to find out if there are any special programs for people whose jobs have been affected by the COVID-19 epidemic. Also, check with creditors to determine if you are eligible to reduce or defer your monthly payments beyond what the government proposes.
Creditors want you to know that they care about your financial health and ability to pay your bills. Most likely, you’ve received e-mails from banks, credit card companies, and mortgage services confirming their commitment to helping you manage your finances. It’s best to keep your monthly payments in good standing pre-virus and before you become unemployed. However, it may be worthwhile to contact them to discuss your options for reducing your minimum monthly payment.
Brown recommends you also look at your bank balance and try to stretch it as much as you can. This will help you avoid tapping into retirement accounts, which could result in a substantial tax penalty.
The Labor Department has more resources for unemployed workers
To make it easier for you to file claims for unemployment benefits, the CareerOneStop website of the U.S. Labor Department provides links to all state agencies. This site offers a wealth resources to help you get back to work, including education/training courses and job search resources. There are also dozens of tools for researching career options.