Thanks to the $2 trillion CARES Act, many gig workers, freelancers, and self-employed individuals now qualify for unemployment benefits for the first time ever. But those workers have found that claiming benefits isn't so easy: Only 12% of freelancers who have applied for unemployment assistance have received it, according to a recent Freelancers Union survey of 2,767 independent workers.
State unemployment systems aren't very user-friendly for independent workers, and "the frustration is the process and being able to apply," says Andrew Stettner, senior fellow at The Century Foundation, a progressive think tank headquartered in New York City. In the Freelancers Union survey, 58% said they received confusing or incorrect guidance on how to submit as a freelancer, and 51% were delayed in or unable to submit applications due to broken or unresponsive systems.
If you're an independent worker who has experienced a loss of income due to the pandemic, here's what you need to do to successfully navigate the system and get relief.
"I would encourage [freelancers] to look at all of the relief packages that were created," says Rafael Espinal, president of the Freelancers Union.
Independent workers may be eligible for both federal and state relief under several programs.
- State unemployment benefits: The CARES Act lets states provide unemployment benefits to independent workers like freelancers and self-employed workers through the Pandemic Assistance Program (PUA). You may be eligible for up to 39 weeks of weekly benefits through your state's unemployment office. Part-time employees and those who don't have sufficient work history may also qualify for PUA benefits. If your freelance work includes W-2 income, you may also qualify for traditional unemployment benefits.
- Federal unemployment benefit: To supplement state relief, self-employed workers are eligible for an additional $600 per week in federal aid for four months. In some states, workers will receive the $600 as part of their weekly unemployment benefits. In others states, it will be paid out separately from state benefits. These payments were originally slated to continue through July 25 or July 31, depending on your state. Those deadlines could change, however. A new $3 trillion coronavirus relief bill under discussion in Washington proposes that Americans get an extra $600 a week through the end of the year.
- Small business loans: Self-employed individuals and small business owners may be eligible for additional relief under the Paycheck Protection Program loans (PPP), the Economic Injury Disaster Loans (EIDL), and the Self-Employment Assistance Program (SEAP).
Video by David Fang
Unlike payroll employees, freelancers and other self-employed workers typically earn income from several sources. That can make applying for unemployment benefits confusing, since different streams of income may have been affected in different ways by the pandemic.
For example, a personal trainer who worked with clients at a gym, an artist who gave up her dog-walking side hustle, and the owner of a nonessential small business may all be eligible for unemployment. But just how much income each lost, and how much they continue to earn, must be taken into consideration.
The key factor for independent workers to consider when applying for relief is whether or not you've experienced a significant loss of income as a direct result of Covid-19, says certified financial planner Marguerita Cheng, CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland, and a member of the CNBC Advisors Council.
In terms of what constitutes significant income, if you were "teaching 20 hours a week at yoga studios, and then you're teaching twice a week on Zoom" and getting paid less per class, you would be considered to have a significant loss of income, says Cheng. In other words, you don't have to have a total loss of income to be eligible for unemployment benefits.
Video by David Fang
Another complicating factor for some independent workers is that they earn a combination of 1099 and W-2 income, and they may not know whether to apply for traditional unemployment benefits or those under the PUA program.
If you lost a job that paid you W-2 income, it makes sense to apply for traditional benefits, explains Stettner.
"Most likely, if you had a W-2 job, you're going to have to go on the regular benefits, which might be less than the new benefits for freelancers, [even if] freelance is your main income," says Stettner. You need to be ineligible to apply for regular W-2 unemployment benefits to be eligible for the PUA program, and it may also be faster to apply for "regular" unemployment through your state.
Before you start your unemployment application, make sure you have the correct paperwork on hand. The biggest difference between freelancers and payroll employees, says Stettner, "is that they will have to provide tax information or another form of information to the state."
If you've filed your 2019 tax return, the most helpful tax document as it relates to your your unemployment application is Schedule C, says Cheng, which documents your business-related income and losses.
If you haven't yet filed, start by gathering your receipts and tallying your expenses. Freelancer income tends to fluctuate, so you want to provide an accurate and up-to-date snapshot of your earnings. "I think where people are getting tripped up is first, making sure that you're not giving information that's old," says Cheng.
There's no federal timeline for the PUA program. Every state has its own schedule. In Arizona, Illinois, Delaware, and Kansas, for example, online applications opened just in mid May, while in Arkansas, self-employed applications are not yet available.
The wait can be frustrating, but all states are expected to come online by the end of May, says Stettner. And "you can use this time to organize everything and do your taxes," suggests Cheng.
The good news for freelancers is once you do apply for PUA and are approved, you'll get your benefits retroactively, says Cheng.
When you sit down to fill out your unemployment application, take your time.
"There are a lot of questions that can be confusing, because it doesn't sound like they're tailored to independent workers," says Espinal. "But if you answer them incorrectly, it can really jeopardize your opportunity to get funding."
Video by Jason Armesto
For example, some state unemployment applications asks workers whether they're "unable to work because your place [of work] has shut down because of coronavirus," says Espinal. "When you answer 'no' to that question, what you're telling the Department of Labor and other agencies is that you're not working because you're deciding not to work." The answer should be "yes, you're unable to work," even if there isn't a physical place of business that's now closed.
While you're waiting on benefits, Espinal advises freelancers who have lost income "to look for other ways they can apply their skills.There is a lot of work that's out there that's being created because of the pandemic."
After all, if anyone is well-positioned to find new and innovative streams of income, it's independent workers, he says: "Freelancers are known to be very nimble and crafty."
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