If You Get Fired, Can You Collect Unemployment?

Unemployment insurance is a joint state and federal program that provides those out of work with temporary yet steady cash to help them financially. In a big shift, the self-employed now qualify for benefits.

Another 5.2 million workers filed for their first week of unemployment benefits in the week ending April 11, bringing the total who have sought compensation as the COVID-19 pandemic devastates the economy to over 22 million. Notably, that’s near all the jobs that were gained in the decade since the Great Recession.

For many laid-off workers, this may be their first time dealing with the unemployment benefits system, a joint state and federal program that provides those out of work with temporary yet steady cash payments to help them financially while finding a new job.

The good news: Legislation passed by Congress significantly increases payments and the length of time they’re available, and extends eligibility to the self-employed. So many gig workers and contractors will be able to get unemployment benefits under the “Pandemic Unemployment Assistance” program. But they may need to wait sometimes as states struggle to implement this new law during the surge in overall claims.

Who Qualifies For Unemployment Benefits?

Unemployment benefits are available to workers who are unemployed “through no fault of their own,” such as a layoff which served the employer’s interests. Those fired for cause (such as misconduct or sexual harassment). Or who leave voluntarily or refuse an offer for work, need not apply.


Each state, district, and territory sets its guidelines for who is eligible and the number of benefits. You must meet your state’s criteria for wages earned or time worked during an established period, known as a “base period,” which is usually the very first four out of the last five completed calendar quarters before the time that your claim is filed, according to the U.S. Department of Labor.

The general rule of thumb is that unemployment benefits are based on a percentage of one’s earnings – roughly between 40% and 60% – over a recent 52-week period, and paid out weekly over a period of between 12 to 28 weeks, depending on the state, and up to an additional 13 weeks extension.

If you’ve received a severance package from your former employer – usually in the form of a lump-sum payment – it’s important to check with your state’s labor department to see if you qualify for unemployment insurance. Some states, such as California, don’t disqualify you from receiving benefits if you have severance pay, be it a lump sum or in regular installments. But Texas prohibits people from qualifying for unemployment benefits while receiving most types of severance pay, such as dismissal/separation income paid on termination of employment in addition to an employee’s usual earnings from the employer at termination.

An unemployment rate graph.
Since the covid-19 pandemic, unemployment is especially high.

How To Apply For Unemployment Benefits

Contact your state’s unemployment insurance program office immediately upon unemployment, especially in light of the sharp increase of claims filed throughout the country over the past couple of weeks. Check with the office to determine the preferred method of registering yourself in the system, be it online or by phone. While doing so in person was traditionally an option (that’s how we got “unemployment lines”), it’s a bad idea now.

Keep in mind that registering your claim for unemployment benefits takes time to process, especially in light of the COVID-19 pandemic, so budget your pocketbook accordingly before your first check appears. It usually takes two to three weeks after filing your claim to receive your first benefit check. Many state unemployment offices are struggling to keep up with the spike in demand.

Some states, and the District of Columbia, require a one-week waiting period. In that case, you will file your first unemployment claim (in which you list the jobs you applied to that week), but you won’t receive a payment. Rather, your first payment would apply to the second week of your unemployment claim.

Many states, including California, Hawaii, and New York, have waived their waiting period as a result of the recent pandemic. And, under the new $2 trillion Coronavirus Aid, Relief and Economic Security Act (CARES Act), the relief package that provides financial assistance to families and businesses affected by the COVID-19 pandemic, the federal government will provide temporary full funding for the first week of unemployment. Check your state’s site and state law about changes to the waiting period after your initial claim.

Tap More Resources From The Labor Department

The U.S. Labor Department’s CareerOneStop site provides links to each state’s relevant agency to speed your path to filing claims and eligibility requirements. The site also boasts a wealth of resources aimed at getting you back to work: education/training courses, job search resources, and scores of toolkits for researching careers.

How The Coronavirus Stimulus Package Changes The Rules For Unemployment Benefits

Two parts of the federal coronavirus rescue package have measures aimed at helping the unemployed. The Families First Coronavirus Response Act pumps an additional $1 billion into the unemployment compensation system to ease the burden on states processing and paying unemployment benefits.

States with greater unemployment increases will receive more funds, and employers are encouraged to reduce the number of hours worked by employees instead of layoffs. States are also directed to ease eligibility requirements and access to unemployment benefits for workers who do lose their job. The federal government will also pay 100% of coronavirus-related extended unemployment compensation, instead of the usual 50%.

The CARES Act provides even greater benefits. For example, it provides up to 39 weeks of unemployment benefits for self-employed people, independent contractors, and others out of work because of the coronavirus pandemic who don’t otherwise qualify for benefits. Weekly unemployment checks are increased by $600 through July.

The federal government is also reimbursing states for the first week of unemployment benefits until the end of the year (states normally impose a one-week waiting period before paying benefits). An additional 13 weeks of benefits are included, too. That’s what the law says. Implementing it is up to the states, which have been waiting for official guidance from the Federal Department of Labor on how to administer the new benefits.

Get Your Paperwork In Order

The better prepared you are, the faster your claim will be processed (and happier is the rep who processes your claim). Assemble supporting paperwork as if you’re going to the Department of Motor Vehicles – but with the reward of a paycheck.

Your Social Security number alone is not enough (but it’s a start). You will need to provide the name, address, phone number, and dates of employment from your most recent employer. For most people, this is all you need. Some state laws, such as Utah, require a driver’s license as a form of identification. If you’re not a U.S. citizen, but legally authorized to work in the U.S., you will need to provide your Alien Registration Number (that eight- to nine-digit USCIS number).

For ex-military, have handy your DD214 form, which is your certificate of release or discharge from active duty (if you don’t have it, you can request a copy through the U.S. Department of Veteran Affairs milConnect website). Former federal employees will need to provide either their Standard Form 8 (SF-8) or Standard Form 50 (SF-50). If you receive or will receive, severance pay from your former employer, you will need to provide documentation detailing your payout. Qualified pension recipients should have their pension documentation at the ready.

Calculate Your Unemployment Benefits

Loony Toons

Each state’s unemployment office provides its calculator – and explanation – to help you determine how much you will receive every week. Formulas can be as easy as taking the highest quarter of wages in your base period and dividing it by the number of weeks the state grants you unemployment compensation, to more complex formulas that incorporate additional factors. But unemployment offices try to be as transparent as possible.

Massachusetts Department of Unemployment Assistance, for example, provides an unemployment benefits determination calculator in which you enter the total wages you received in the past four quarters. Upon entering the quarterly amounts, the calculator computes your weekly pay and the number of weeks you’ll be paid unemployment benefits (26 weeks, in the case of the Bay State).

Keep in mind that these calculators are intended to help you estimate your benefits and are intended only for advisory purposes. Ultimately, it will be your state’s computer system that will crunch your numbers and determine your official weekly amount. Since benefits for the self-employed are a new phenomenon, don’t expect estimates.

A calculator.
Unfortunately, employee benefits are taxed in the U.S.

Yes, Unemployment Benefits Are Taxed

Discovering that your unemployment benefits are taxed may not be nearly as shocking as the news of your full-time job loss, but it can be just as tough to accept. After all, you just lost your job through no fault of your own. Why should Uncle Sam make you pay for your misfortune? The reality is that unemployment benefits are a form of income, and that income is taxable at both the federal and state level.

There are some states, however, that completely exempt unemployment benefits from taxes. But state taxes vary from state to state, so make sure you review your state’s unemployment tax policies. According to the Internal Revenue Service, unemployment compensation, for the most part, includes any amounts received under federal or state unemployment compensation laws. This includes state unemployment insurance benefits and benefits paid to you by a state or the District of Columbia from the Federal Unemployment Trust Fund.

You have the option to have as much as 10% of your weekly benefits withheld for federal taxes/ Taxpayers will receive a Form 1099-G from the IRS, which shows the amount received and the amount of any federal income tax removed from your benefits. Taxes may be withheld from unemployment benefits at the request of the benefits claimant by using Form W-4V, while others who choose not to have their taxes withheld may need to make estimated tax payments during the year, according to the IRS.

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File For Unemployment Benefits Where You Work, Not Where You Live

You should file your claim in the state where you worked. For instance, for residents of Maryland and Virginia who work in the District of Columbia, it is required that you file your claim with the District of Columbia.

If you worked in multiple states, check with the unemployment agency of the state and state laws you currently live in for information on how to file your claim appropriately with other states.

How To Collect Unemployment Benefits If You Are Self-Employed

Statistics show that more and more people are choosing to be self-employed as a sole proprietor or the owner of a small start-up firm, making use of technology to create niches for themselves as the United States continues to move toward a virtual economy.

Entrepreneurship is exciting and a good cause and comes with a big set of rewards, but it also comes with a certain amount of risk attached to it as well. Most times, you are operating without a financial safety net in your company policy. But the good news is, when you meet certain conditions, you can collect unemployment insurance benefits without disqualification. The key for you to understand is that before you can take money out of the system, you must pay money into the system.

The easiest way for self-employed people to do so is to set their business up as an “S” corporation. Then you must also structure the corporation so that you draw a salary as an “employee” of the corporation. When you draw a salary, you’ll then be required to pay a percentage of your earnings into your state’s unemployment compensation fund.

If you are self-employed but choose to remain so as a sole proprietor, freelancer, or independent contractor, you won’t be able to draw unemployment because you have not set up the mechanisms necessary to pay into your state’s unemployment benefits fund.


How do things change by state?

One thing to be cognizant of is that unemployment benefits and eligibility will vary from state to state. Some states do not require you to pay state unemployment insurance even if you have an S corporation. Others may require you to pay just the federal unemployment tax, but that does not necessarily mean you’ll be eligible to collect state unemployment benefits.

The best thing to do is to check with your particular state’s unemployment benefits administrator and find out exactly what rules apply to you before creating an “S” corporation. In most states, you need to apply for, and be denied, regular unemployment benefits before you will be considered for Pandemic Unemployment Assistance. If that’s the case in your state, you may be able to apply for regular unemployment now and get the ball rolling, even if your state isn’t processing PUA claims at this time.

Once you’ve been denied regular unemployment benefits, your state agency will either automatically review your claim for Pandemic Unemployment Assistance or prompt you to submit an additional application for those benefits. In Indiana, for example, you have to proactively apply for PUA after being denied regular unemployment insurance.

A handful of states don’t require self-employed individuals to go through the regular unemployment claim process first. Instead, they have developed a separate application process for gig workers, independent contractors, and those who are self-employed.

Check your state unemployment agency’s website for specific guidance on when and how to apply. Due to the overwhelming number of people claiming unemployment benefits in recent weeks, many states are asking people to apply only on certain days based on their last name or area code to prevent websites from crashing.

The next steps depend on the state. Keep an eye on your email or unemployment portal for updates or requests for additional information. In most cases, you need to file a weekly claim certifying that you are still out of work. You will not be paid benefits for the week if you don’t file your claim, so don’t skip this step, even if your claim is still being processed. Once your claim is approved, it will take roughly three weeks to receive unemployment benefits. Unemployment benefits are retroactive, so your payments will be backdated.

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Riley Draper