Whether you have a business on top of your day job or work for yourself full time, your hustle can be both a blessing and a curse.
If you are one of the millions of Americans who have lost their jobs due to the coronavirus crisis, you may be able to apply for unemployment insurance. However, if you have a side job or are self-employed, your unemployment benefits might not be as high as those of other types of workers. Here’s what to expect if you have your own small business and are looking to collect unemployment.
How unemployment benefits work
Unemployment benefits are a form of unemployment insurance intended to provide temporary financial relief when you lose your job. This safety net is a joint program run by the states and federal government and is designed to provide cash to unemployed Americans.
“Unemployment insurance is just that: insurance that protects you when you’ve lost your employment income through no fault of your own,” says George Warner, program director and attorney at the nonprofit legal services provider non-profit Legal Aid at Work, which focuses on workers’ rights.
Each state sets its own specific eligibility criteria for benefits, but generally, these criteria include:
- Being unemployed through no fault of your own
- Meet work history and salary requirements, which typically involve state criteria for how long you worked before losing your job and the wages earned during that time
Your state may also have different requirements. You can search for local requirements using the Careeronestop website, which is sponsored by the Department of Labor.
To start receiving benefits, you must submit a claim to the unemployment insurance program in the state where you worked. There are usually several ways to submit a claim, including in person, by phone, or online.
Under normal circumstances, unemployment insurance is temporary and lasts no longer than 26 weeks, Warner says.
“During times of economic hardship, you may be eligible for unemployment insurance for longer than 26 weeks, based on specific state and federal laws designed to extend benefits,” Warner says.
Can you collect unemployment if you have a parallel activity?
During the pandemic, the answer to this question was a little simpler for those running a side business. Under the Mixed Earner Unemployment Compensation program, for example, workers who were eligible for other types of unemployment benefits and who had earned $5,000 a year through self-employment could receive a weekly allowance of $100. in addition to regular unemployment insurance. However, pandemic-related unemployment assistance programs across the country ended in September.
Under traditional unemployment insurance programs, the answer to whether you are able to collect unemployment benefits while running a side business varies on a case-by-case basis.
“It depends on a person’s specific circumstances,” says Warner. “You may be able to collect unemployment insurance even if you have a side business or a part-time job. The maximum amount you can earn each week from a side business while still qualifying for benefits depends on your previous earnings and state law. ”
Some states, for example, reduce the amount of unemployment benefits you can collect, Warner says. The exact amount depends on the exact laws where you live, but may be a dollar-for-dollar reduction depending on your income. However, some states allow you to earn up to a certain percentage of your total weekly unemployment benefits in a side business or part-time job without affecting or reducing the benefits paid to you.
However, if you make too much money in a side business, it could make you completely ineligible for unemployment benefits.
You’ll also want to be sure to report your stampede earnings in full, as failure to do so can be considered unemployment insurance fraud, the penalties for which range from reimbursement of benefits with interest to criminal prosecution.
To learn more about local regulations, visit your state’s unemployment insurance website.
How to apply for unemployment benefits
Anyone seeking to apply for unemployment benefits, including those with a side job, can usually do so in person, over the phone, or online through the state unemployment office where you worked.
Although the application process varies by state, some basic steps to follow include:
- Locate your state’s unemployment office. The US Department of Labor offers this useful Unemployment Benefits Locator Map.
- Prepare your personal information. You will need information such as your address, phone number, and social security number, as well as banking information if you want to receive your benefits by direct deposit.
- Gather your income information. You may be asked for financial information, such as your total income for the year. If your unemployment office asks for additional documents, you should have 1099 forms, your annual tax return, or other proof of income on hand.