Unemployment and CARES Act

The unemployment rate in the US has soared due to COVID-19. Your employer has been paying unemployment insurance (UI) to the state (based on where the business is located) on wages paid to employees. It is this state fund that is used to pay unemployment benefits.

With the passage of the Coronavirus Aid, Relief and Economic Security (CARES) Act at the end of March, the Federal government has extended the limits, increased the amount and expanded who is eligible.

Unemployment benefits have, in the past, had a limit of six months (26 weeks) pay out for most states The Federal government has guaranteed an additional 13 weeks, bringing the total time that benefits are available to 39 weeks.

The benefit is paid on a weekly basis and many states have waived the work-search requirements and waiting period. That does not mean that benefits are instant and automatic, but that once approved, the payment will be retroactive to the first week of unemployment. 

The amount each person receives weekly is based on their wage, with each state having their own maximum. The CARES Act includes adding $600 per week of federal money to the benefit, for a maximum of four months.

The new law also expands who is eligible to receive unemployment benefits. Self-employed, contractors and gig economy workers who are not able to work due to COVID-19 are now included with those who can collect.

Here is something you may not know: Unemployment benefits are taxable. Benefits are a replacement of income and are taxed at both the state (if applicable) and federal level. You have the option of having tax withheld on your benefits.  After the end of the tax year, the state that paid you the unemployment benefits should send Form 1099-G, Certain Government Payments.

If you have become unemployed or someone you know has, apply for unemployment benefits as soon as possible. Visit your states unemployment website to start the process.