Whether you have a business alongside 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.
While unemployment insurance is temporary, your benefits might be murky if you have a side job. Here’s what to expect if you have your own small business and you’re looking to collect unemployment.
What are 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.
Things to consider about collecting unemployment with a side business
Under most regular unemployment insurance regulations, independent contractors and self-employed workers can’t collect unemployment benefits. But the Coronavirus Aid, Relief, and Economic Security (CARES) Act provides relief to freelance workers, independent contractors, self-employed workers and small-business owners who wouldn’t otherwise qualify.
If you have work you do besides a day job you lost, consider these factors when applying for unemployment insurance.
Where you live is one of the biggest factors in not only how much money you receive, but for how long you receive that money.
Under the CARES Act, benefits have been extended an extra 13 weeks in some states. That means for states like Florida and North Carolina, where unemployment insurance lasts 12 weeks, you could get benefits for up to 25 weeks. Massachusetts provides benefits for a maximum of 30 weeks under regular circumstances.
Your state also determines your maximum earnings. The CARES Act expands earnings an extra $600 per week. Mississippi unemployment residents who earn the state’s maximum $235 per week will now see up to $835 per week. Ohio residents who max out their state’s unemployment benefits at $802 per week will see that go up to more than $1,400.
Type of work
Not all side hustles are considered equal-income players. For instance, selling goods on the internet isn’t the same as delivering groceries or building websites.
States view different types of work differently, which means the work you do could have an impact on how much you earn or if you earn anything at all. When you file for unemployment, you’ll need to provide proof of income, whether that’s from 1099 forms, pay stubs or a W-2. Each state has its own filing requirements, so make sure you know what you need before you get started.
Gross vs. net income
Right now, self-employed filers are seeing different calculations than their full-time counterparts. States are using net — rather than gross — income for self-employed workers. Those with traditional day jobs are evaluated based on gross income.
This matters when evaluating how much you should receive in benefits. If your company brings in a certain amount of money but you have expenses you write off, that helps lower your tax bill, but it hurts how much you could earn through unemployment insurance. Luckily, the CARES Act established a minimum amount you can receive even when you report $0 in earnings — and then you get an extra $600 on top of that minimum.
FAQs about collecting unemployment with a side business
Are you eligible for government stimulus checks if you have a side business?
Yes; every American is set to receive $1,200 plus $500 per child as of their most recent tax returns.
What types of financial relief is there for side-hustle workers?
As far as unemployment insurance, under normal circumstances, people with side businesses are not eligible for unemployment benefits. However, the CARES Act expanded coverage for nontraditional workers, including freelance workers, independent contractors, small-business owners, freelancers 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.
If you have your own small business, you could also apply for the Paycheck Protection Program. The Small Business Administration hands out the money, and if you use it to pay your employees (including yourself), the funds will be forgiven.
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 worked.
How long will I receive benefits?
The number of weeks you are able to receive unemployment benefits varies by state, though the CARES Act extended the timeline by 13 weeks in many states. PUA benefits are capped at 39 weeks, ending July 31, 2020.
How much unemployment money will I get?
How much money you receive from unemployment benefits depends on where you live 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 plus $600 extra per week. If your side hustle brings in any sort of substantial income, it could lower how much you receive from your state, but you’ll still receive the minimum and the $600 weekly bonus.
Featured image by Viktoriia Hnatiuk of Shutterstock.