As the coronavirus pandemic continues to shutter businesses nationwide, millions of workers are facing layoffs and furloughs. By mid-May, the number of unemployment claims filed had skyrocketed to a two-month total of over 36 million.
If youâ€™re one of the millions finding themselves without a paycheck, unemployment insurance can be the life raft you need to stay afloat during this economic storm. Before you apply, youâ€™ll want to make sure you understand what unemployment insurance entails, who is eligible and how the Coronavirus Aid, Relief and Economic Security (CARES) Act impacts benefits right now.
Similar to how you have health insurance to cover unexpected medical expenses or car insurance to insulate you from accidental auto costs, your income has a safety net, too.
Unemployment insurance is a joint federal-state program offered by the U.S. Department of Labor that doles out cash payments to eligible workers. The program was established in 1935 and is intended to replace a portion of wages for workers who have lost their job through no fault of their own, as long as they are able and willing to work. Unemployment benefits are funded by taxes on employers.
While each state can determine its own parameters for the unemployment insurance program â€” with the dollar amount of benefits, the duration of benefits and the eligibility of benefits differing from state to state â€” they still must meet certain federal guidelines. Typically, eligibility for unemployment insurance entails meeting the following requirements:
Unemployment insurance offers temporary financial relief to eligible workers, but the amount of that financial relief and its cadence varies widely from state to state. In many cases, states calculate your benefit amount based on a percentage of your pre-unemployment earnings.
While the U.S. Department of Labor reported that the most recent average weekly benefit payment was $372.97 â€” or usually half of a personâ€™s typical weekly earnings â€” unemployment benefits vary drastically from one state to the next. Additionally, many states set their own floors and ceilings on how much unemployment benefits can be.
In Alabama, for example, weekly benefits range from a minimum of $45 to a maximum of $275, and are calculated using your base period earnings. Meanwhile, in New York, there is a minimum benefit rate of $104 and a maximum of $504, with benefits calculated from your base period earnings.
Unemployment benefits do not last forever, and the amount of time youâ€™ll receive benefits is again dependent on the state in which you file your claim. In some cases, states use their own unemployment rate to determine the maximum amount allowable for that benefit year.
For the most part, though, states have set the amount of time that an individual is able to receive unemployment benefits at 26 weeks. Still, that can vary widely from state to state, with some having shorter limits and others longer ones.
Alabama, for example, says it generally allows unemployment benefits to last for 14 to 20 weeks, while New York says your claim lasts one year, during which your full weekly rate can be paid out a total of 26 times.
Itâ€™s important to note that unemployment benefits are taxable, and are subject to federal and most state income taxes. You must report unemployment benefits as income on your tax return.
You might be required to make estimated quarterly tax payments, or you may elect to have your taxes withheld by the State Unemployment Insurance agency. In fact, experts recommend paying your taxes upfront to avoid any surprises when tax season rolls around, or if you anticipate getting a new job by the end of the year that lands you in a higher tax bracket.
While eligibility criteria differs from state to state, you are typically eligible for unemployment benefits if you meet the following requirements:
Additionally, states typically require you to take regular action in order to continue receiving benefits. Those actions might include filing weekly claims and answering questions about your willingness to work, active job searches, any earnings you made that week, job offers you might have received or any other requirements requested of you by your state.
Unfortunately, many who are unemployed do not qualify for benefits. Typically, you wonâ€™t qualify for unemployment benefits if you fall into any of the following camps:
You may also be denied unemployment insurance if you:
In response to the pandemic, Congress passed a $2 trillion coronavirus relief package, which includes significant expansions to the countryâ€™s unemployment insurance program. As noted above, those expansions include:
In many cases, you can easily claim your unemployment benefits online, by telephone or in person. Per the U.S. Department of Labor, you should take the following steps to file for unemployment benefits:
As soon as you are unemployed, file a claim in the state in which you worked. You can find information on your state unemployment insuranceâ€™s office here, where they will direct you on whether to file your claim in person, by phone or online.
With unemployment levels at record highs, you might be instructed to take additional steps when filing. In New York, for example, the day you apply should be based on the first letter of your last name â€” so if your last name begins with an A, you need to apply on a Monday.
Be prepared with the information youâ€™ll need to provide, including addresses of your former employer and dates in which you worked there, as well as proof of wages and employment. Other information you should have on hand includes:
You will also likely be asked whether you want to receive your benefits via a debit card or direct deposit. You will need to provide your bankâ€™s routing and account numbers if you choose to have your benefits directly deposited.
Typically, payments take between two to three weeks from when you first filed a claim to be issued. However, departments are facing unprecedented levels of claims due to the COVID-19 crisis, so you may experience further delays.