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How does unemployment work?

  • The CARES Act expands unemployment pay and duration

    To help workers deal with the economic challenges of the pandemic, the federal government passed the CARES Act to expand unemployment benefits. It increased unemployment benefits by up to $600 per week for a maximum of 39 weeks. At the time of publishing, the expanded benefits were set to end by July 31.


  • Choose from a debit card, direct deposit, or check

    Applicants can usually choose how they’d like to receive their unemployment insurance pay, according to Sangeetha Malaiyandi of the Consumer Financial Protection Bureau. Most states allow recipients to receive the money through a direct deposit into their bank accounts or on a state-issued prepaid debit card, which will get topped up every week they’re eligible for benefits. Some states also offer unemployment benefits by paper check upon request.

  • Taxes due on unemployment benefits

    While there aren’t restrictions on how the unemployment money is spent, federal taxes and potentially state taxes will need to be paid on any benefits received. If individuals don’t want to get a hefty tax bill next year, they can request that the government withhold taxes from their benefits by filling out form W-4V.

  • Certify eligibility for benefits every week

    After applicants have been approved for unemployment insurance, they typically must certify eligibility with their state’s unemployment benefits program every week, or biweekly, depending on the state, to continue receiving payment. Certification forms, which can usually be filled out online or via phone, ask a series of questions about the previous week, such as how many hours worked, if any; how much money was earned, if any; whether applicants were available and willing to work; and whether they received other compensation such as sick time.

  • Work search requirement may be waived during the pandemic

    States usually require people receiving unemployment benefits to actively search for a new job and keep a work search record of the places they’ve applied. Some states, including New York, Florida, North Carolina, and Washington, have loosened that requirement or waived it entirely during the COVID-19 pandemic.

  • Unemployment benefits stop if asked to work

    Workers who were furloughed during the pandemic will usually stop receiving unemployment benefits if their place of employment reopens and asks them to return. Getting called back to work counts as “an offer of suitable employment” and thus disqualifies individuals from receiving unemployment pay in most cases, according to the U.S. Department of Labor.


  • PPP loan may end unemployment benefits

    People may lose the expanded unemployment benefits they receive through their state and the CARES Act if their previous employer receives a forgivable loan from the Paycheck Protection Program and reinstates part, or all, of their paycheck. Depending on their wages, they may receive less money than they do on unemployment benefits if their employer participates in this program.

  • Independent contractors can’t get PPP and unemployment

    Qualified gig workers, independent contractors, and self-employed people who have been disrupted by the pandemic may be able to receive a forgivable loan of an amount equivalent to 2.5 times their monthly pay through the Paycheck Protection Program. However, they can’t receive both unemployment insurance and PPP at the same time, according to Erica Gellerman of Bench. They’ll need to crunch the numbers to see which one will get them the most money before choosing a program.

  • Expect long wait times and glitchy websites

    Many state unemployment programs buckled under the incredible demand from new applicants during the pandemic. Applicants have reported wait times on unemployment hotlines that last 8 hours and glitchy websites that are unavailable for hours on end, according to Colin Lecher and Mia Sato of The Markup.

  • Year-end unemployment earnings statement on its way

    Early next year, states will send out IRS Form 1099-G, which includes the total amount of unemployment compensation received, as well as the federal and state tax withheld, if any, according to TurboTax. Use this form to report the money received from unemployment benefits when filing your federal tax return.

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