Self-employed workers and contractors are typically not eligible for unemployment benefits. But like with everything else, during the COVID-19 pandemic, things are different.
Largely because of COVID-19, Minnesota’s unemployment system has experienced a massive uptick in applications: Since March 16, the state has processed 439,704 of them. Due to recent Federal legislation, those receiving unemployment benefits should also already be receiving an additional $600 per week above what they were already entitled to. That’s thanks to the $2.2 trillion CARES Act, which also established the $1,200 stimulus checks and billions in small business loans.
The CARES Act also contains a large change to who is eligible for unemployment during the pandemic: For the first time, contract workers are also eligible for unemployment through the bill’s unemployment framework, Pandemic Unemployment Assistance (PUA).
The bill gives some discretion to states to determine who is covered, but essentially, any individual who has exhausted all rights to regular unemployment and is self-employed should qualify. This includes those with only part-time employment. Independent contractors (like freelance graphic designers or self-employed plumbers) and gig economy workers (like ride share drivers) should qualify. Business owners for whom the business is their main source of income may qualify as well.
Here’s what you need to know about these new benefits.
I’m a contract worker impacted by coronavirus. When can I apply for unemployment?
Now. The Minnesota Department of Employment and Economic Development (DEED) administers Minnesota’s unemployment benefits, including benefits through the Pandemic Unemployment Assistance program. They advise you apply now, although the program to distribute benefits to self-employed people is not yet ready, so your information will be in the system for faster processing once the program is ready to make payments.
The PUA will be in effect until Dec. 31, 2020.
How do I know if I am eligible?
DEED will determine this, but eligibility is basically determined by whether or not your employment was impacted by COVID-19. For example, if you have quit your job or lose your job as a result of COVID-19 you should qualify. Instances in which a member of your household has been diagnosed with COVID-19 or you have been diagnosed with COVID-19 or are experiencing symptoms should qualify. And if you cannot work because you are now the primary caregiver for a child who is unable to attend school, you should also qualify.
How can I apply?
You can apply through the Minnesota Unemployment Insurance program. But DEED asks that you apply in a specific way. There are specific questions about your status as an independent contractor or with self-employment. They’ve built out a guide specifically for contract workers here.
When will benefits for contract workers be evaluated and start to be distributed?
DEED says that they expect the program to be operational before the end of April. Earlier this month, DEED said that they were waiting on guidelines from the Federal Department of Labor in order to build out the program and have now received them. Now, they are building out the program and told MinnPost that this “requires updated processes and programming to implement it.”
How much money will I receive?
Benefits are still being determined by DEED. But the formula to determine benefits should be available by the end of April, when the program is completed.
Will I still receive an additional $600 check if I apply for unemployment as a contractor?
Yes. Once you are approved for unemployment, you should also receive a weekly $600 check. This money is through a different Federal program: Federal Pandemic Unemployment Compensation (FPUC). This benefit expires in July of 2020.
People need to remember that the system is not yet updated for contract workers and self employed, so when you sign up, you will see a lot of zeroes. There is also a guide for how they want you to enter the information, so read that so you know how to answer the questions if you’re in this category. And be patient. Nobody is getting anything yet…
I have been self-employed for 28 years and have paid into unemployment for 28 years. Today I found out that I was denied unemployment and had to appeal. My appeal is set for June 29th. I can’t wait that long. I also have tried calling numerous times into unemployment and can not get through. Do you have any recommendations for me? Thank you! Julie
Julie – you have been DENIED? Or are in the system, able to file your weekly claim, but the amount says $0?
I’m hosting a UI (and small business/self-imployed loans) webinar with Women in Film and Television Sunday afternoon. Maybe tuning in will help.
I have been self-employed for 35 years. Since the shutdown my income is greatly reduced. I followed the 35 step instructions on-line, on how to apply for unemployment bennies under the cares act. I filled out the form on-line but it would not let me go past step 21. So I submitted what I had and was denied. I appealed and have a court date June 5th. Has this happened to others? I’m hoping this is just a mistake and will get some help by month end. Interesting that there is no email nor is there a phone # so you can communicate directly with a human being at the unemployment office.
Normally, I’d be opposed to this; this being people getting benefits from a system they didn’t pay into. But, given the situation we’re in, I’m very much in favor this, but there needs to be some discussion moving forward.
The unemployment system is paid for by a payroll tax, and any good conservative economist will tell you that payroll taxes are ultimately paid by the employee & not the employer. Employers figure the cost of an hour of labor as the hourly wage, Soc. Security/Medicare taxes, work comp costs, & unemployment payroll taxes.
For some time unscrupulous companies have been exploiting this “independent contractor” scam, which leaves the contractor on the hook for work comp costs, the employer side of Social Security, & unemployment taxes.
I’m in favor of independent contractors getting UI, because I want the economy to come back strong. One of the mistakes of the Great Recession was that home owners were left to their own devices. This created a drag on the economy, and a drag on home prices, both of which hurt people like me who did not get liar loans or borrow too much.
But going forward, it’s reasonable to ask if we should require Uber & their gig workers should both be paying in to the system they are free-riding on today.
Now the bartenders & wait staff who have told us they don’t want to raise their minimum wages because they love the tip system, I don’t feel too sorry for them. They extolled the virtues of being tipped workers, pocketing the cash without paying income or FICA taxes. Now that they find their UI based only on their reported income, they’re sowing what they’ve reaped. Mom told me it’s tough to have your cake & eat it too.
I am self employed and signed up for UI. Are we supposed to start filing every week? Since we are in shut down, the answer to actively looking for work is no. Is that a problem?
This is my issue. I am self-employed. The governor shut us down five weeks ago. No income coming in. I understand we do not pay payroll tax or unemployment insurance in. But I believe we pay self-employment tax. So five weeks now we have received nothing we have no answers about the amount of money that we will receive is this amount of money going to be the same as the normal people that get unemployment plus the $600. For the morale of my industry all I want is a couple answers so I know how to move forward. The PPP loan gives us self-employed people money from our net income. I work for myself so my gross income pays for my rent my cell phone my health insurance my utilities my work insurance all my bills I also have a home office so it pays part of them. So my net income is quite small. So they are giving us our loan out of our net income then we have to pay ourselves and pay our rent and pay our health insurance and pay our cell phone bill and everything else out of that which does not amount to nearly my income as it normally would be. I believe I could be wrong but Business is with employees take their gross payroll and pay their employees plus they get .5% of the girls payroll to pay all their bills now tell me how this is fair for the self-employed So they are giving us our loan out of our net income then we have to pay ourselves and pay our rent and pay our health insurance and pay our cell phone bill and everything else out of that which does not amount to nearly my income as it normally would be. I believe I could be wrong but businesses with employees take their gross payroll and pay their employees plus they get .5% of the girls payroll to pay all their bills now tell me how this is fair for the self-employed. Explain to me how the self-employed person is not getting screwed in this deal. So as it sits now if we go back to work May 4 I will make more money off the PPP loan then I would unemployment but if we have to wait two more weeks to go back to work I will make more money off unemployment if the unemployment is the same as it is for the unemployed people for the self-employed. But we have not got any of those answers from the Minnesota state unemployment. Still the amount I would receive on the PPP is about 40% of my income. The part that makes me mad is people are making money off these programs I’m here self-employed people are losing half their income. I know big companies that are still working and have a plied for these loans and have gotten them so now they’re still making money working and they have gotten their loans. if you could clear some of the stuff up for me that would great be great and I would pass it on to my fellow coworkers in the same industry.
Sorry some of this got duplicated.
Just what is “self-employment tax”?
What is the Self-Employment Tax?
The self-employed tax is a special tax filing for individuals who are self-employed. The tax accounts for social security and Medicaid. Those who consider themselves self-employed are required to submit taxes for themselves using the 1040 form Schedule through the IRS.
In a traditional W2 employee relationship, most of the burden falls on the employer to pay Medicaid and social security. For the self-employed, all the tax burden falls solely on the independent contractor’s shoulders, causing it to be higher than a salary or wage job.
How to Calculate Your 2019 Self-Employment Tax Rate
The IRS states that the self-employment tax 2019 rate is 15.3 percent on the first $132,900 of net income plus 2.9 percent on the net income in excess of $132,900.
Ultimately, for the self-employment tax 2019, you’ll have to pay both portions of employer and employee social security and Medicare, which breaks down as follows:
To be fair self employee should be paid unemployment insurance. This is disaster and people lost their jobs amd income.
Federal and state must pay unemployment benefit to everyone who paid taxes.
And in the future, anyone who files their taxes as 1099 also needs to be paid unemployment benefit as w2 employee does, through paying our own unemployment benefit taxes.
We need to chamge current unemployment benefit system to be equal and fair to everyone who pays tax and working. Self employee in the future we can pay our own tax for unemployment benefit and receive this UI benefit paying our own unemployment insurance.
States and federal goverment need to fix this current unemployment system and make this system be available to everyone.
I am an independent contractor…I have work now…but applied for 1 week and of coarse was denied. I never knew independent contractors were ever eligible. My question is….? …the Cares Act Unemployment is supposed to be retroactive to January 27th. I had several weeks of no work including the whole month of March and 1st week in April, plus the last week of January and 2 weeks in February. If the Federal Cares Act is retroactive….HOW do I apply for all the weeks past and the whole month of March? I paint and of coarse in the winter is strictly interior and I found nobody was getting any interior work done…residential…not new construction…I don’t do new construction spraying…I strictly roll and brush. The UI system usually only posts the previous 1 week….??
Freelance/gig-worker, still getting denied for the “new” unemployment insurance.
Yes, going on 11 weeks for me