Whether you have a business along with your day job or you work for yourself full time, your side hustle can be both a blessing and a curse.
If you’re one of the millions of Americans who are out of a job as a result of the coronavirus crisis, you can apply for unemployment insurance. But if you have a side business or are self-employed, your unemployment benefits might not be as high as those of other types of workers. Here’s what to expect if you have your own small business and you’re looking to collect unemployment.
The basics of unemployment benefits
Unemployment benefits are a form of unemployment insurance meant to provide temporary financial assistance when you lose your job through no fault of your own. It’s a joint program between states and the federal government to provide out-of-work Americans with cash.
Each state has its own set of rules and requirements for unemployment benefits, including how long you’ve been out of work, how much you earned and the conditions in which you lost your job. For instance, if you were fired for poor performance, you’re not eligible for unemployment benefits.
Can you collect unemployment if you have a side business?
Under most regular unemployment insurance regulations, independent contractors and self-employed workers can’t collect unemployment benefits. But the CARES Act, which expired at the end of 2020, provided relief to freelance workers, independent contractors, self-employed workers and small-business owners who wouldn’t otherwise qualify.
Since 2020, Congress has passed two pieces of legislation that extend the unemployment insurance benefit period for individuals who are self-employed, including those with side businesses.
Unemployment during the coronavirus pandemic
The Continued Assistance for Unemployed Workers Act extended Pandemic Unemployment Assistance (PUA) funds under the CARES Act through March 14, 2021. On March 16, the unemployment benefit for side businesses was again extended through September 6, 2021, under the American Rescue Plan Act.
PUA funding is available through each state’s unemployment board. Workers who are eligible for PUA can receive an extra $300 weekly benefit under the program.
Under the Mixed Earner Unemployment Compensation program, workers who are eligible for other types of unemployment benefits and have earned $5,000 in a year through self-employment can continue receiving a $100 weekly benefit on top of regular unemployment insurance.
Since the start of the pandemic, workers with side businesses or who are self-employed, freelancers or independent contractors can receive up to 86 weeks of unemployment insurance through PUA.
How to apply for unemployment benefits
To collect Pandemic Unemployment Assistance if you have a side business, you’ll apply in person, over the phone or online through the unemployment office in the state where you worked.
Although the application process varies by state, some basic steps to take include:
- Locate your state’s unemployment office. The U.S. Department of Labor offers this helpful unemployment benefits locator map.
- Prepare your personal information. You’ll need to have details like your address, phone number and Social Security number, as well as bank information if you’d like to receive your benefits through direct deposit.
- Gather your income information. You might be asked for financial information, like your total income for the year. If your unemployment office requests additional documentation, you should have 1099s, your annual tax return or other proof of income on hand.
If you’re approved for PUA, you’ll need to recertify your unemployment status at regular intervals. Intervals might differ depending on the state you worked in.
Workers who own small businesses but are denied PUA benefits can appeal the unemployment office’s decision. Each state has its own formal process to initiate an appeal, such as a downloadable appeal form or address to direct handwritten appeal letters to.
There’s also a deadline for appealing an unemployment benefit decision; for example, appeal forms in California must be submitted within 30 days of the date on the decision notice. Make sure to submit your appeal within your state’s specified timeframe.
FAQs about collecting unemployment with a side business
What type of financial relief is there for side-hustle workers?
Under normal circumstances, people with side businesses are not eligible for unemployment benefits. However, the CARES Act — and now the latest American Rescue Plan Act — expanded coverage for nontraditional workers, including freelancers, independent contractors, small-business owners and other types of workers who are self-employed. Even if you do your side business only a fraction of the time, you’re eligible to receive some compensation if you lost work.
How do I know if I qualify for unemployment benefits?
The Pandemic Unemployment Assistance (PUA) program was made to help workers who wouldn’t otherwise qualify for unemployment insurance, like self-employed and freelance workers. If you don’t otherwise qualify for regular unemployment insurance, you may qualify for benefits under PUA. If you can prove that you’ve lost work due to the COVID-19 crisis or otherwise had to stop work to care for a family member, you might be able to get benefits. If you believe you are eligible, you should apply in the state where you last worked.
How long will I receive benefits?
The number of weeks you are able to receive unemployment benefits varies by state, though the American Rescue Plan Act extended the timeline by 29 weeks in many states. PUA benefits are capped at 86 weeks, ending September 6, 2021.
How much unemployment money will I get?
How much money you receive from unemployment benefits depends on where you worked and how much money you earned according to your most recent tax returns and pay stubs. You’ll get at least your state’s minimum unemployment amount.