Collecting Unemployment Benefits for Self-Employed Workers
Can you collect unemployment if you work as a freelancer, independent contractor, gig worker, or self-employed individual running your own business?
Self-employed workers, independent contractors, and freelance workers who lose their income were traditionally not eligible for unemployment benefits. However, the federal government has expanded unemployment benefits to cover self-employed and gig workers.
Unemployment for Self-Employed Workers
Here are examples of pandemic unemployment benefits for self-employed workers.
CARES Act Unemployment Benefits
The federal and state governments have enhanced sick leave and unemployment benefits, and have enacted legislation to help impacted independent workers, including self-employed individuals and independent contractors.
The Coronavirus Aid, Response, and Economic Security Act (CARES Act) includes the Pandemic Unemployment Assistance (PUA) program, Pandemic Unemployment Compensation (PUC), and the (Pandemic Emergency Unemployment Compensation) (PEUC). Benefits will:
- Provide unemployment to self-employed workers who don’t traditionally qualify. The amount will be based on previous income, and will vary based on location and benefit guidelines. The minimum PUA benefit rate is 50% of the average weekly benefit amount in your state.
- Include supplemental benefits. Eligible workers will receive $600 a week in additional benefits for up to four months, through July 31, 2020.
- Provide extra weeks of benefits. There will be an additional 13 weeks of benefits to help those who are still unemployed after they run out of state benefits. The length of state benefits varies based on location, but the maximum is 26 weeks. Total eligibility will be 39 weeks.
How to Check Your Eligibility
You may be eligible for unemployment benefits, depending on your personal circumstances and how your state chooses to implement the CARES Act. Eligibility varies from state to state, so check with your state unemployment office to find information about who is eligible to collect unemployment compensation, and how to go about filing a claim.
When you become unemployed, it’s a good idea to check if you may be eligible for benefits right away. It can take time to begin receiving benefits if you do qualify, so you should file your claim as soon as possible.
Documentation You Need to File
State requirements will vary, but, in general, you will need the following information to file a claim:
- Your name, full mailing address, and phone number.
- Driver's license or state ID number.
- Social Security or Alien Registration number and drivers' license number.
- Proof of income which may include 1099 tax forms, W2 tax forms, pay stubs, and tax returns.
- Bank account number and routing number for direct deposit, if that's how your state pays unemployment claims.
For example, in Iowa, self-employed workers will need to provide any of the following documents as proof of income:
- 2019 1099
- 2019 W-2
- 2019 Pay stubs
- 2020 Pay stubs
- Form 1040, U.S. Individual Income Tax Return
Before you file, check with your state unemployment for details on the documentation you need to file to open a claim. It will be easier to apply if you have prepared in advance.
If you have difficulty filing for benefits, don't panic. States are upgrading their unemployment systems to accept applications from self-employed workers, including independent contractors and gig workers, and to handle the overload of applications. If you can't reach the unemployment office, your state legislators may be able to assist with accessing benefits.
Payroll Protection Program
The Payroll Protection Program (PPP) is a Small Business Administration (SBA) funded program that provides forgivable loans to those impacted by COVID-19. In addition to small businesses and sole proprietorships, independent contractors and self-employed people are eligible for loans to cover their payroll and other certain expenses through existing SBA lenders.
In addition to the PPP, there are other programs available for small businesses that self-employed individuals may be eligible for.
The Families First Coronavirus Response Act provides a refundable tax credit for eligible self-employed individuals who must self-quarantine, obtain a diagnosis, or comply with a self-isolation recommendation for coronavirus.
Here's information on COVID-19 unemployment and sick leave benefits for employees and self-employed independent workers and gig workers.
Some companies are setting up relief funds for independent contractors and gig workers who are impacted by the coronavirus:
- Uber drivers and delivery persons will receive financial assistance for up to 14 days while their account is on hold if they are diagnosed with COVID-19 or asked to self-quarantine.
- Instacart is providing "up to 14 days of pay for any part-time employee or full-service shopper who is diagnosed with COVID-19 or placed in mandatory isolation or quarantine, as directed by a local, state, or public health authority."
- DoorDash is offering up to two weeks of financial assistance for eligible dashers and couriers.
CNBC reports that Amazon Flex is supporting drivers on a case-by-case basis. Other companies may also offer benefits to contract workers. Check with the company to learn about benefits that may be available to you.
Disaster Unemployment Assistance
If you were unemployed as a result of a major disaster, you may be eligible to receive Disaster Unemployment Assistance. The federally funded Disaster Unemployment Assistance program (DUA) is designed to provide assistance to workers who become unemployed as the result of a presidentially declared major disaster, and who are ineligible for other unemployment benefits.
State unemployment law may provide for eligibility for benefits in some other special circumstances, and your unemployment department can help you navigate the process should you become unemployed.
Self-Employment Assistance Program
The Self-Employment Assistance Program is a federal government endorsed program which offers unemployed or displaced workers in some states unemployment benefits when they are starting a business. The Self-Employment Assistance program pays a displaced worker an allowance, instead of regular unemployment insurance benefits, to help keep them afloat while they are establishing a business and becoming self-employed.
Standard Unemployment Benefits for Self-Employed Workers
Because employers contribute to a fund for unemployment benefits, their employees are eligible to receive benefits from the government, if they qualify after losing their job. If you are operating as self-employed you most likely didn't pay into your state's unemployment fund.
Other than in special circumstances, If you were paid as an independent contractor and receive a 1099 form, you were not considered an employee and would not be eligible for unemployment. That's because eligibility for unemployment is based upon being employed by an organization that was paying into the unemployment insurance fund.
When You're Already Collecting Unemployment
If you are collecting unemployment based on a job you had, working freelance can impact the benefits you are receiving. For example, in New York state, you need to report income when you do freelance work, do "favors" for another business, start a business, or are or become self-employed while you are collecting unemployment benefits. If you are doing other work, you may become disqualified from receiving unemployment benefits.
There are similar requirements in other states. In addition, in order to claim benefits, you need to be ready, willing, and available for work. Some states require that you keep and regularly turn in an employment log documenting your efforts to regain employment.
If you are receiving unemployment benefits, make sure that you know the guidelines regarding any work you engage in. Violating the requirements can result in a loss of benefits and also substantial fines if you are discovered.
The information contained in this article is not legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law.
U.S. Department of Labor. "Unemployment Insurance Relief During COVID-19 Outbreak." Accessed April 12, 2020.
U.S. Department of Labor. "U.S. Department of Labor Announces New Cares Act Guidance On Unemployment Insurance For States In Response To Covid-19 Crisis." Accessed April 5, 2020.
SHRM. "The Coronavirus Aid, Response, and Economic Security Act “CARES Act” Accessed March 28, 2020.
Iowa Workforce Development. "Pandemic Unemployment Assistance (PUA)." Accessed April 4, 2020.
SBA. "Paycheck Protection Program." Accessed April 9, 2020.
House Committee on Appropriations. "H.R. 6201, Families First Coronavirus Response Act." Accessed March 19, 2020.
SHRM. "Trump Signs Coronavirus Relief Bill with Paid-Leave Mandate." Accessed March 19, 2020.
Uber. "Coronavirus (COVID-19) Resources & Updates." Accessed March 23, 2020.
Instacart. "Introducing New Guidelines and Policies to Support the Health and Safety of the Instacart Shopper Community." Accessed March 23, 2020.
DoorDash. "COVID-19 Financial Assistance Program." Accessed March 27, 2020.
DoorDash/Caviar. "Courier Support Center." Accessed March 27, 2020.
CNBC. "Gig Economy Companies From Uber to Lyft Take Action as Coronavirus Cases Grow." Accessed March 23, 2020.
U.S. Department of Labor. "Disaster Unemployment Assistance (DUA)." Accessed March 23, 2020.
U.S. Department of Labor. "Self Employment Assistance." Accessed March 23, 2020.