It goes without saying that the COVID-19 pandemic has completely destroyed the labour market in the United States, with more than 36 million Americans filing for unemployment benefits over the past few weeks. Nearly half of American households have been impacted by the unheard-of economic shock, which has resulted in lost employment income or lower earnings.
The COVID-19 outbreak has had a knock-on effect on the freelancing economy as well, but it is also providing many people with a crucial lifeline. In fact, some economists predict that when firms adopt the new “work-from-home” paradigm brought on by the coronavirus pandemic, there will be even more chances for freelancers. Can you receive unemployment while working as a freelancer? is a legitimate concern for recently laid-off individuals dipping their toes into the freelance pool.
Yes, in a nutshell, but specifics differ from state to state. In most cases, receiving revenue from gig or freelancing work while receiving unemployment benefits results in a reduction in benefits. Here are some other inquiries concerning independent work and unemployment benefits that you might wish to get answered before learning more:
How Do Benefits for Unemployment Function Generally?
You must get in touch with the unemployment insurance agency in your state to submit an application because unemployment benefits are managed at the state level. State-by-state regulations differ, but generally speaking, if you lost your job due to no fault of your own and were working for a specific amount of time, you are eligible for unemployment benefits.
You’ll also need to look for new employment, and there are requirements for reporting job-seeking activity in each state.
Can a Freelancer Apply for Unemployment Benefits?
Freelancers wouldn’t often be qualified for unemployment benefits. However, in response to the COVID-19 issue, Congress created the CARES Act, which has a clause allowing states to continue providing self-employed people with special pandemic unemployment benefits through July 2020.
Therefore, provided they can prove their income, freelancers are temporarily qualified to claim unemployment benefits. For further information on how to apply, contact the unemployment offices in your state.
What impact will freelance work have on my unemployment benefits?
While receiving benefits, you can still work as a freelancer, but doing so will cut down on your unemployment compensation.
Your state’s formula for determining what is known as the “partial benefit amount” and how much additional money you earn will determine how much your unemployment benefits are lowered.
Each state has a separate cap on how much you can make before your benefits are lowered, for instance 30% of your unemployment benefits. Your unemployment check will often be reduced by any amount you earn beyond the threshold. You will lose eligibility for benefits, including the additional $600 in aid provided by the US government under the CARES Act, if your freelancing earnings are greater than the amount of your unemployment benefits (through July).
If you accept a part-time job and leave, you can lose your eligibility because you are no longer unemployed by choice.
Taxes on My Unemployment Benefits:
Do I Have to Pay Them? What About Earnings from Freelancing?
Both are true. Benefits from unemployment are taken into account when calculating your federal income tax due for the upcoming year since they are regarded as taxable income. Included in that is the additional $600 weekly benefit offered by the US government.
When you receive a paycheck, your employer deducts money for taxes automatically; but, if you receive unemployment benefits, you must choose to have taxes taken. It’s a smart idea to decide to have taxes deducted from your unemployment check so you won’t be caught off guard when it comes time to submit your taxes.
Be aware that any money you earn from freelancing will be subject to self-employment taxes in addition to being taxable income.
Do I Need to Work While Receiving Unemployment Benefits?
That depends on your circumstances and the potential earnings from freelancing.
For instance, you should avoid earning more than you do while receiving state unemployment benefits because doing so could result in you losing your eligibility and the additional $600 per week that the CARES Act provides.
You definitely want to be careful not to go above any level that would disqualify you, unless you are confident you will make up that extra $2,400 a month working freelance. Because every state is different, you should always double-check to see if engaging in any form of freelancing may disqualify you.
For instance, various laws in some states may prevent you from receiving benefits if you start a business or are available for work.
However, there is no reason you can’t experiment if you are confident you won’t break the laws of your state by freelancing. In fact, your experience working for yourself might help you bolster your résumé or open up full-time job opportunities. If you’re interested in freelancing as a source of additional income, think considering signing up with Fiverr and getting business right now.
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