10 things you must know about filing for unemployment benefits

The COVID-19 pandemic has put millions of Americans out of work already, and as many as 14 million jobs are estimated to be lost by this summer. Designed to help them: unemployment benefits, 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.

For many laid-off workers, this may be their first time dealing with the unemployment-benefits system, which is itself under stress as a result of the astronomical increase in new claims filed. But there's good news, too: Legislation passed by Congress significantly increases payments and the length of time that they're available, and extends eligibility to the self-employed - so many gig workers and contractors will now be able to get unemployment benefits under the "Pandemic Unemployment Assistance" program.

Let us help you navigate unemployment benefits to get you the help you deserve. The sooner you apply, the better.

Who Qualifies for Unemployment Benefits?

Unemployment benefits are available to workers who are unemployed "through no fault of their own," such as a layoff. Those fired for cause (such as misconduct), or who leave voluntarily or refuse an offer for work, need not apply.

Each state, district and territory sets its own guidelines for who is eligible and the amount 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 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.

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. According to CareerOneStop, it usually takes two to three weeks after filing your claim to receive your first benefit check.

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 (see slide 5). Check your state's site about changes to the waiting period.

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. 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 in lieu 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 also 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 is included, too.

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 also 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 states, 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 Veterans 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

Each state's unemployment office provides its own calculator - and explanation - to help you determine how much you will receive on a weekly basis. 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.

Yes, Unemployment Benefits Are Taxed. Sorry!

Discovering that your unemployment benefits are taxed may not be nearly as shocking as the news of your 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.

California, New Jersey, Oregon, Pennsylvania and Virginia are exceptions; they completely exempt unemployment benefits from taxes. 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, including 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.

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 office of the state you currently live in for information on how to file your claim appropriately with other states.

You Can Get Unemployment Benefits Even If You Still Have Some Work

Obviously, if you're still working full-time, then you're not unemployed and, therefore, not eligible for unemployment benefits. But if, say, you've lost one job but kept another, or if you get paid for a temporary assignment, you can still collect unemployment benefits. However, they will be reduced accordingly to compensate for the additional income you're receiving. You must report your gross wages earned each week, not just your take-home pay.

In Missouri, for example, partial unemployment benefits are calculated by taking your weekly wages and subtracting $20, or 20% of your weekly benefit amount, whichever is greater. That amount is your deduction, which is then subtracted from your weekly benefit and rounded down to an even dollar amount. Any withholding for federal taxes and such is taken from this amount.

Although state policies vary, as a general rule, if you perform part-time or temporary work, which includes self-employment, you are still required to fulfill your state's requirement of providing a list of new job searches each week. The District of Columbia, for example, requires listing two job applications each week. And your state wants you to have the time to actively look for full-time employment, with the selfish goal of stopping payments of unemployment benefits to you when you return to work full time.

Budget for Life on Unemployment Benefits

Now that you've calculated how much you'll receive in unemployment benefits on a weekly basis, there's no better time to put pen to paper and budget for the next few months. "This is an important time to determine your fixed and discretionary expenses," says Lisa Brown, chief strategy officer at financial planning firm Brightworth in Atlanta. Brown recommends speaking with your mortgage company if you're a homeowner and inquiring with creditors, including credit card companies, to see if there are special programs for those whose jobs are impacted by the COVID-19 pandemic and to see if you're eligible to defer or reduce monthly payments above and beyond what the government is proposing.

Creditors in particular want you to know that they're concerned about your financial wellbeing, and your ability to pay your bills. You've likely seen e-mails from mortgage services, credit card companies and banks expressing their commitment to help you stay on top of your finances. While it's better to maintain your monthly payments pre-virus and pre-unemployment, it might be worth it to reach out and inquire about your options to reduce your minimum monthly payments.

Brown also recommends that you look at how much money you have in your bank, and stretch it out as much as possible to avoid tapping into retirement accounts (which could come with a significant tax penalty).


This article was written by Marc A. Wojno from Kiplinger and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected].

Visit our market volatility resource center for a growing library of education and tools to help you navigate the uncertainty today and keep saving for your best life.