Can Self Employed Individuals Apply for Unemployment?

The work industry is different from previous years. There is a lot of unemployment, more employment opportunities in newer fields like the tech industry, and there are more people who are self-employed. However, for those that are self-employed, can they still benefit from unemployment benefits? Can unemployment benefits help your situation?

What Does it Mean to be Self-Employed?

A self-employed individual is not someone who works for a specific employer who pays them a consistent pay in the form of a wage or salary. Instead, self-employed people (also known as independent contractors) earn income by contracting with a business or trade directly. Self-employed individuals can expect different setups when it comes to their taxes, and benefits that they can receive.

How to Tell if You are Self-Employed?

There are a few different factors that you can look at that can help you determine whether or not you are self-employed. If you are a:

  • Contract Worker
  • Freelancer
  • Driver for a Company like Uber or Lyft
  • Independent Distributor (Think Mary Kay Beauty)
  • Person Whose Specific Skills Impact Their Income
  • Person with a Side Gig (Depends)
  • 1099 Recipient
  • Airbnb Host (Possibly)

You can review what the IRS considers as self-employed on their website if you want to specifically see if your situation would apply!

What are Benefits of Being Self-Employed?

Every career path has its own sets of pros and cons. Self-employment is no different. Those that choose to be self-employed as a way to earn an income can see some nice perks that come along with choosing this path! Benefits that attract people include:

  • Choosing Work Hours
  • Creating a Personalized Work Environment

Choosing Work Hours

A benefit that many self-employed individuals like is the fact that they can set their own work schedule (depending on the kind of work that they do). For example, if you knit sweaters and someone purchases a sweater that you need to provide in a month. It may only take 40 hours to make a sweater but you have the course of a month to finish that work! That means you can do so accordingly. This can be especially beneficial to single parents that work while their kids are at school or after they go to bed for the night.

Creating a Personalized Work Environment

Depending on the type of business you run, you can structure your work environment accordingly. For example, instead of wearing business casual clothing everyday to go to an office, you can wear your pajamas while you review spreadsheets in the comfort of your home. You can choose where you work, what you wear, etc.

What are the Drawbacks of Being Self-Employed?

Just as there are some attractive perks to being self-employed, there are also some drawbacks to be aware of as well! Drawbacks that can make people avoid self-employment include:

  • Long Work Hours
  • Doing Everything Yourself

Long Work Hours

Setting your own work schedule is a benefit, however what if there are long work hours? A full-time employee typically works 8 hours a day, 5 days a week. This leaves more time for a person to not be working instead of working. However, when you own your own business you may need to dedicate more time which can lead you to working long hours a day, everyday. This can get draining after awhile!

Doing Everything Yourself

When you first get your business off the ground, you may find yourself dealing with all aspects of the business. You may need to deal with the marketing, legal aspects, documents, and more when making sure everything is set up and running properly. You are essentially all departments which can make a person feel overwhelmed. This can be especially hard when you are responsible for all of those aspects but aren’t seeing the pay right away.

What are Regular Unemployment Insurance Benefits?

Also referred to as Unemployment Compensation, this is a type of insurance that helps people who have lost their jobs. This insurance can temporarily replace a portion of an individual’s wages while they try to find work. This insurance system has been around for decades, in fact it was created all the way back in 1935. Taxes are collected from employers and are then paid into a system on behalf of working people to provide income support if they lose their jobs. Unemployment compensation can help people who have no income at least make it by if they are no longer employed. This system can be especially helpful in times of economic stress like the recession of 2008 and the ongoing Coronavirus pandemic.

Unemployment insurance is a state program but it is overseen by the U.S. Department of Labor. The basic program in a majority of states can provide up to 26 weeks of benefits to unemployed workers, and on average replace roughly half of the amount of their prior wages. The states handle the funding and payment of the actual benefits that workers receive while the federal government deals with administrative costs. States need to adhere to some federal guidelines but for the most part have the ability to set their own benefit levels and qualification requirements.

Can an Individual who is Self-Employed Apply for Unemployment?

A perk of being an employee of an employer is the fact there are plenty of benefits. For example, employees can get paid maternity leave, sick days, paid time off, etc. Another benefit is the fact that employers fund unemployment benefits which allows their employees to receive that assistance after they lose their job. If you are self-employed, you likely haven’t contributed to your state’s unemployment fund. This means that unless there are special circumstances, independent contractors or those who received a 1099 form would not be eligible for unemployment benefits.

Are You Ever Considered an Employee?

You could potentially be considered an employee and still be eligible for unemployment benefits. For example, independent contractors that get hired then may be able to be considered as employees. It depends on the state that you are in. Both federal and state law will determine the eligibility of an individual as an employee. It is important to keep in mind that you may be eligible for unemployment assistance in special circumstances so your state’s unemployment department will be able to help you understand what that means for your specific situation.

How to Check Eligibility?

Since eligibility varies based on your area, you will need to check with your state unemployment office. From there, you will be able to get more information about your eligibility on collecting unemployment compensation.

What About Disaster Unemployment Assistance?

There may be other forms of unemployment assistance that you could qualify for if you are self-employed. If you find yourself unemployed as a result of a major disaster then you may be able to receive help from disaster unemployment assistance. This is a program that can help workers who have directly felt the impact of an eligible disaster.

Self-Employment Assistance Program

This self-employment assistance program provides the opportunity for early re-employment to dislocated workers. This program can encourage and support unemployed workers to create their own job opportunities by starting their own small business. Recipients of this program will be able to get self-employment assistance allowances every week instead of traditional unemployment insurance benefits. This can help workers establish their business and become fully self-employed. Recipients will be able to use this assistance as a form of aid to get their businesses off the ground.

This type of program is voluntary for states to participate in. Which means not every state partakes. To date (this article was written October 5th, 2021), Delaware, Mississippi, New Hampshire, New York, and Oregon have active self-employment assistance programs. However, you should review available opportunities in your state at the time that you are looking for assistance. Programs may expire, or open up to additional states! State assistance changes frequently so in order to ensure the most accurate information you want to get in touch with your state’s unemployment department.

What if You are Already Receiving Unemployment Benefits?

Individuals currently receiving unemployment benefits may find that they still want more money. Many people tend to turn to self-employment as a way to make money. However, when you add that additional source of income, you may impact your existing unemployment benefits. You could potentially disqualify yourself or even limit the amount of unemployment assistance you can receive. You need to review what state laws are. What may be a law in your state may not be applicable in another and vice versa. You can get clarification on what counts as a violation for your unemployment benefits by talking to your state’s unemployment department.

How to Collect Unemployment

You may be curious on how you would be able to collect unemployment assistance if you are eligible to receive it! Luckily, the process of claiming unemployment insurance isn’t as difficult as it may seem.

How to File a Claim for Unemployment Compensation?

There are plenty of ways that you can file a claim for unemployment compensation. You may be able to file either online, over the phone, or in person. Every state has their own guidelines on how you can file a claim for unemployment compensation. A good rule of thumb is to have information ready like your:

  • Social Security Number
  • Alien Registration Card (If you aren’t a U.S. Citizen)
  • Driver’s License
  • State I.D. Card Number
  • Full Mailing Address
  • Phone Number
  • Previous Employment Information (Over the Past 2 Years)

Once you file your claim it will usually take a few weeks until you receive your benefit funds. These funds can come in either the form of a check, direct deposit, or even a  debit card. Each state is different so the waiting period will vary.

Disqualifications from Unemployment Insurance Benefits

Unfortunately, not everyone is eligible to receive unemployment insurance benefits. Depending on the laws of your state, some disqualifications may include:

  • Quitting with no good cause
  • Termination for misconduct
  • Resigning because of illness
  • Leaving for marriage
  • Employment status
  • A labor dispute
  • Attending school

How to Contact an Unemployment Office

The best way to get in contact with an unemployment office is to visit your state unemployment agency website. Think about all of the people struggling with unemployment in your state. That is a lot of people so it can be difficult to reach the office over the phone. That is why many states encourage individuals to handle the filing process online. You may have a hard time trying to get in touch even if you just have a question or want to talk to a representative about your claim.

Even though you can review common questions under the FAQ portion of the site, unemployment claims can be difficult especially if it consists of special circumstances. If you want to try to get in touch with your state’s unemployment department then you should look in the “Contact Us” section of the website.

You can also find contact information for the unemployment insurance department online by using a search engine like Google. You want to look up your state’s name, unemployment office, and phone number. For example, you can use the search engine Google and look up “ Florida unemployment office phone number”. This search should provide you the information you are looking for!

If English isn’t your first language then you may be in luck. Some states may have different phone numbers depending on the language preferred. For example, California has different unemployment claim telephone lines for English, Spanish, Mandarin, Cantonese, and Vietnamese. If available, additional information on other phone numbers should also be on the “Contact Us” section of your state’s unemployment site.

Overall

Unemployment insurance benefits can be a great way for people to get support if they lose their employment. However, not everyone will be able to receive these benefits. In fact, those that are self-employed like independent contractors can have a hard time getting this unemployment compensation unless they fall under special circumstances. The rules for unemployment insurance vary based on the state you are located in. Assistance opportunities are constantly updating, changing, or expiring so you want to make sure you review what up-to-date opportunities are available!

Article References

https://www.investopedia.com/terms/s/self-employed.asp

https://www.taxslayer.com/blog/self-employed-reporting-income-gig-economy/

https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center

https://www.cbpp.org/research/introduction-to-unemployment-insurance

https://oui.doleta.gov/unemploy/self.asp

https://www.thebalancecareers.com/how-to-claim-unemployment-benefits-2058799

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