Key Highlights

  • According to Bureau of Labor Statistics data, there between 10.5M – 15M independent contractors and self-employed workers in US
  • Workers reporting to state employment offices for unemployment insurance benefits using both W-2 forms and 1099 tax forms may receive smaller UI checks in some states

Now that the $2.2T CARES Act made independent contractors and self-employed workers eligible for unemployment insurance benefits for the first time ever, some of those newly eligible workers may receive smaller UI benefits than they legitimately anticipate.

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The glitch?

States generally determine unemployment benefit eligibility based upon W-2 wages that are reported by employers, not the 1099 tax forms that independent contractors and self-employed workers usually submit. Same goes for determining the size of an eligible recipient’s UI benefit check.

This variable state framework is impacting many millions of independent contractors and self-employed workers who earn the bulk of their income from contract work (reported on 1099 tax forms) and who also earn a bit extra with side jobs (reported on W-2 forms.)

Many, if not all, states are looking only at W-2 forms to determine the amount of UI benefit checks and many, if not all, of the 10.5M – 15M independent contractors and self-employed workers may not be receive UI benefits that reflect their combined 1099 and W-2 incomes.

Despite the CARES Act significantly expanding UI benefits to more workers who were previously ineligible (self- employed and independent contractors), increasing weekly jobless pay and increasing the duration of that pay, such reduced UI payouts for independent contractors and self-employed workers exacerbate the UI application processing problems of confusion and delay. These reduced UI benefit payouts also mean that independent contractors and self-employed workers may be even harder pressed to make ends meet, if at all.

 

Thanks to CNBC.

Also read: Key Aspects About Unemployment Benefits, Lots of Worry @ Small Business Loan Programs Running Out of Money, 7.5M Small Businesses at Risk of Closing