Unemployment Benefits for Self-Employed: What to Know

Self-employed workers may qualify for unemployment benefits under the CARES Act or if you run an S corporation.
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Written by Steve Nicastro
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Update Dec. 27, 2020: President Trump has signed a $900 billion relief bill passed by Congress on Dec. 21. The relief package included an extension of pandemic unemployment benefits for self-employed workers, contractors and gig workers. However, a delay between the vote in Congress and the president's signature meant some unemployment benefits lapsed over the weekend. We'll update the information below as details become clear on how the relief will be enacted.

Unemployment benefits have traditionally been available only to those who work for an employer and lose a job through no fault of their own.

However, self-employed workers who have been dealing with the financial impacts of the COVID-19 outbreak and business owners who operate as an S corporation might also qualify for unemployment benefits.

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Unemployment benefits under the CARES Act

The federal government has expanded unemployment benefits under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Self-employed workers who are usually ineligible for unemployment benefits — including independent contractors, sole proprietors and gig workers — may now be eligible. They may also qualify for additional money: the new law provides an extra $600 a week in unemployment compensation and extends benefits for 13 weeks (for a maximum of 39 weeks of benefits).

Eligibility and guidelines vary by state, and you may be eligible if you are self-employed and have lost income due to coronavirus measures, or you’re unable or unavailable to work for reasons related to COVID-19, such as being quarantined or caring for a sick family member.

Under normal circumstances, states require you to seek work each week that you file a claim, but the CARES Act provides flexibility if you are unable to because of COVID-19.

Due to the launch of new unemployment application systems and a surge in the number of people claiming unemployment benefits in recent weeks, some states aren't yet able to process new claims and payments may be delayed. But there are signs that early roadblocks to filing for benefits are beginning to lift.

Contact your state’s unemployment insurance office to learn about who can collect benefits, how to file a claim and if any delays are expected.

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Unemployment benefits in normal times

Under normal circumstances, businesses structured as sole proprietorships aren’t able to collect unemployment benefits because unemployment taxes aren't paid if you don’t have employees.

However, you may be able to collect benefits as an S corporation if you treat yourself as an employee. That means you receive a paycheck from your business that deducts federal and state taxes (including unemployment taxes).

To receive benefits, you must actively seek work each week that you file a claim. You can file a claim with the unemployment insurance program in the state where you worked.