Unemployment sucks. I know – I’ve been there before. I was unemployed for 5 months after I separated from The USAF. It wasn’t that I didn’t want to work, far from it. I just had a difficult time finding work.
The fact that I relocated across the country and didn’t have a network to tap into made finding a new job an even more difficult task.
The good news is that unemployment insurance is there to help you bridge the gap between jobs. Here is what you need to know about unemployment insurance and how to claim unemployment:
What is Unemployment Insurance?
Federal Unemployment Insurance is a safety net designed to assist workers who are unemployed through no fault of their own. Federal Unemployment Insurance is run by your local state government but is funded by federal and state taxes which are paid by employers.
How to Qualify for Unemployment Benefits
Each state has its own requirements regarding unemployment benefits eligibility, so be sure to check with the state in which you are filing. In general, the following rules will apply:
No fault loss of employment. Most people who become unemployed through no fault of their own are eligible to file unemployment benefits. Most people will be eligible for unemployment benefits if they were laid off for lack of work, and sometimes if you are put on a leave of absence, such as a temporary plant closing, or seasonal work. You may also be eligible for other reasons of unemployment, such as being out of work due to a natural disaster, employer went out of business, job moved overseas, you completed your military obligation or other reasons. Be sure to check with your state regarding your particular situation.
Must be physically able to work. You must be physically able to work, available for work, and actively seeking suitable work. Suitable work is generally considered employment in an occupation in line with your prior training, education, and experience. Work may not be considered suitable if the wages, hours, or working conditions are not as favorable as most jobs in your occupation in the local labor market or if you are not physically able to perform the work.
Note: If you are physically unable to perform work due to a disability, you may not be eligible for unemployment benefits. This is because unemployment benefits and disability benefits come out of different pots of money. If you are physically unable to perform work, you should look into state disability benefits.
Where to File for Unemployment Benefits
Each state is responsible for running its unemployment office. A complete list of state unemployment offices can be found at the US Department of Labor Workforce Security site.
When You Should File for Unemployment Benefits
You should file for unemployment benefits as soon as possible because you can only receive benefits in weeks which you file a claim. Most states have a 1-2 week waiting period, but you must still file to get on the books and continue filing each week that you remain unemployed. Provided that your unemployment benefits claim is approved, you will most likely receive your first unemployment check during your second or third week of unemployment, depending on your state’s unemployment benefit rules.
How to File for Unemployment Benefits
Gather your information. You will need to provide your state labor board (or other governing agency) with your personal and work information. Be prepared to provide your SSN, employment history for the previous 2 years (employer name, location, the position held, etc.), the date you last worked, wage history, union information if applicable, DD Form 214 if recently separated from the military, education level, and possibly other information.
Apply online, by phone, or in person. Different states have different setups, but most states now offer online unemployment benefits application, as well as by telephone or in person. In some states, it is mandatory to meet with a career assistance advisor at some point.
Delay in approval? Keep filing weekly claims. If your application is not approved right away, that does not mean you are not or will not be eligible for unemployment benefits. Sometimes an extra form needs filled out of more information about your claim is needed. Keep filing for unemployment benefits because you may receive benefits in arrears. If you wait for a decision, you will not receive benefits for weeks in which you did not file a claim.
How Much Money Will You Receive for Unemployment Insurance?
The amount of money you receive for your weekly unemployment benefit will vary depending on your earning history and the limits of your state. When I filed for unemployment benefits in Texas I received $300 per week, however, some states offer more (the national average is $300 per week).
Unemployment benefits are taxable. Pay attention to the income tax question! Unemployment benefits are considered taxable income for federal income taxes. Taxes are not automatically taken out of your check, so if you want to avoid an unexpected surprise when you file taxes the following year, it may be a good idea to have taxes taken out when you receive your benefits. If you choose to have taxes withdrawn, the IRS will automatically withdraw 10% of your unemployment benefits.
Receiving Unemployment Benefits
File weekly claims. Most states require people receiving unemployment benefits to file a weekly claim with their state. This means you need to call in and verify that your status has not changed. You can expect to go through an automated phone system that asks whether you are still physically able to perform work, if you are actively seeking work, if you earned any income in the previous week, and if anything about your situation has changed.
Get paid weekly or biweekly. Each state determines how often they pay unemployment benefit recipients, but its payment is usually weekly or biweekly. Be sure to check with your state’s unemployment board.
Keep accurate records! States require that you maintain a job search while receiving unemployment benefits, and you need to keep records verifying that you are searching for work – you must generally make 3 job searches per week, by either contacting employers, submitting resumes or going to interviews. Tracking your job search efforts includes maintaining a list of jobs applied for or applications submitted. Many states give you a Job Search Log to make tracking easier. Make sure you keep accurate records because they can audit you later and you can lose your benefits if they discover you are not actively seeking new work.
Report any earnings. You can still take on work while receiving unemployment benefits, but you must report it and your earnings will reduce the number of benefits you receive. Still, it is better to earn some money through part-time work than to do nothing at all. If you fail to report any earnings, you will have to pay back any benefits you received, plus interest. If you knowingly fail to report earnings, you may be charged with fraud, which can result in a denial of benefits and additional penalties.
Receive benefits by check or direct deposit. Most states offer both options for receiving unemployment benefits. I recommend receiving your unemployment benefits by direct deposit if you have a bank account – that way you do not have to pay check cashing fees or wait for the mail, which can be unpredictable. Direct deposit means you will receive your benefits more quickly. If you need access to a good online bank, I recommend Capital One 360 or another free high-interest savings account that offers easy access.
How Long Can You Claim Unemployment Benefits?
Time limits of unemployment benefits. The length of time that benefits are available is determined by the State in which you file an unemployment insurance claim. Benefits can be paid for a maximum of 26 weeks in most states, however, due to the current global economic crisis and mass layoffs in the United States, the US government and many states recently approved emergency unemployment compensation (EUC), which extended unemployment benefits for certain individuals.
Unemployment Insurance Extended Benefits. The basic Extended Benefits program provides up to 13 additional weeks of benefits when a State is experiencing high unemployment (usually over 6%, but check with your state). Some States have also enacted a voluntary program to pay up to 7 additional weeks (20 weeks maximum) of Extended Benefits during periods of extremely high unemployment. Not everyone who qualified for regular benefits qualifies for Extended Benefits. The State agency will advise you of your eligibility for Extended Benefits.
Can Seasonal Employees Claim Unemployment Benefits?
Seasonal employees can collect unemployment benefits, with some exclusions or limitations. It varies by state, and you should research the laws and rules in your state to verify the current status and your ability to file for unemployment benefits.
Exclusions: Federal law already prohibits professional athletes from collecting unemployment benefits between seasons, and teachers from collecting unemployment benefits during the summer. After that, the federal law leaves most eligibility rules up to the states.
Some states are moving away from allowing seasonal unemployment benefits. Several years ago, CNN Money reported that some states are limiting the unemployment benefits they pay to seasonal workers.
Until recently, most states allowed seasonal employees to collect unemployment benefits during the months when they were unemployed. For example, school bus drivers, cafeteria workers, janitors, and many other school employees know they will be unemployed during the summer months. This extends into the arts as well; many actors, stagehands, musicians, and similar entertainment professions are routinely out of work between seasons. Other examples of seasonal workers include construction, hospitality and tourism industries, etc.
There are currently 15 states that limit unemployment benefits to seasonal workers, and several more states have legislation in work to limit benefits or have commissioned studies to determine the impact this would have.
Is it Fair to Cut Unemployment for Seasonal Workers?
Before we answer this question, it will be helpful to take a look at what unemployment insurance is, what it is designed to do, and who pays for it. Then we can better answer the question. Let’s start at the source:
Contrary to popular belief, individuals don’t pay unemployment insurance taxes. Employers and the federal government pay into the unemployment system, and the states handle the distributions (which is why they often have a little more say on who is eligible).
Unemployment benefits are more or less a safety net – they exist to help people through tough times when they lose their job. Workers are usually eligible to receive unemployment benefits when they lose their job through no fault of their own (there are some rules regarding eligibility, such as those listed for teachers, professional athletes, and some other cases).
These benefits aren’t designed to replace full-time income (most benefits are capped at a few hundred dollars per week, depending on your income going into unemployment). Instead, they are designed to help people get by until they can find another source of income. There is also a time limit – usually 26 weeks, depending on the state (some states have extensions depending on how high their unemployment rate is).
To continue receiving unemployment insurance benefits, recipients must be able to prove they are actively seeking employment. This is usually done by sending in a list of jobs they have applied to, or places where they have submitted their resume.
Other Possible Benefits
Along with unemployment benefits, you may be eligible to claim COBRA insurance coverage through your former employer. Be sure to contact your former employer or health insurance provider for more details.
Unemployment Benefit Provisions in the 2009 Economic Stimulus Plan
Update: The 2009 economic stimulus plan calls for an increase in unemployment and COBRA benefits. Be sure to visit this article for more information about increases in benefits you may be eligible to receive. Also keep in mind that some of these updates are temporary, and may not be permanently written into law. Be sure to verify how long you will be eligible to receive benefits with your state jobs board.
Do You Have To Pay Taxes On Unemployment Benefits?
It may not seem very logical, but did you know if you are out of work and receiving unemployment benefits, you have to pay taxes on the money you are receiving while out of work? Sadly, it’s true. But many unemployed have no idea they are responsible for taxes on unemployment benefits and as a result, they get socked with a large tax bill in the new year. It almost goes without saying that if you are out of work, you probably won’t have the extra cash to give to the IRS.
As with most forms of income, the IRS is ready to collect on the revenue you are receiving even if you are out of work. The same is true on the amount of money you receive as part of a severance package or from accumulated vacation/sick pay once you leave a job.
How to Prepare for an Unemployment Income Tax Bill
The only way to avoid a hefty tax bill is to get prepared for the upcoming tax season. Many people do not realize that taxes on unemployment checks are not withheld and it is the responsibility of the recipient to account for these taxes. Last year the IRS recommended to all taxpayers to start withholding tax amounts from unemployment checks should they lose their jobs.
Much like those who are employed, those receiving unemployment could opt to have 10% of their income withheld by completing Voluntary Withholding Request, Form W-4V. The request to withhold money should take into consideration of the $2,400 tax exemption.
Form 1099-G will be sent out from organizations or governmental entities that issued unemployment benefits to recipients. The 1099-G will show the number of benefits that should be reported for the purpose of income taxes on the taxpayer’s 1040 return.
Start Saving Now
If you have not been withholding your own funds or have not requested monies be withheld, start saving now. Contact a licensed tax preparation professional to discuss the estimate of taxes owed. Once you know about how much you’ll have to owe, you can implement a savings plan to ensure you have enough money to cover the tax bill if you don’t believe you are covered, especially if you have been out of work and receiving benefits for an extended period of time.
If you anticipate a future layoff, then it is a good idea to have taxes withheld if you begin receiving unemployment benefits. It is also good to have an unemployment plan in place if you believe you may be in danger of facing a layoff.
Unemployment Benefits are There for you
Losing your job is a difficult experience, but thankfully we have unemployment insurance to fall back on. With a positive attitude and a little luck, hopefully, you won’t need to claim unemployment very long.