Although working for yourself offers such advantages as flexibility and the ability to set your own goals, one serious drawback to self-employment is finding yourself out of billable work with no income streaming in. Although you should have a nest egg saved for this event, you might wonder if the government offers unemployment insurance benefits to self-employed people like you. While most self-employed people won't qualify for unemployment benefits, other government assistance might be available.
Individual states administer unemployment benefits, or unemployment insurance, to former employees of a company when they're lost their job through no fault of their own. Self-employed people cannot receive unemployment benefits because funding for the states' programs is provided by employers through a combination of their federal and state payroll taxes. Congress established unemployment insurance through the Social Security Act in 1935, and a combination of federal and state laws determine which employees are eligible for compensation, how much they receive and how long they receive it. People receiving this benefit must have earned a minimum amount of wages for which their employer paid unemployment insurance tax.
If you consider yourself self-employed, but your business is incorporated and pays unemployment taxes, you may be eligible to collect unemployment benefits. Besides paying unemployment taxes, you must also typically pay wages to employees totaling $1,500 or more in any quarter of a calendar year or you must have had at least one employee on any day of a week during 20 weeks in a calendar year, whether or not the weeks were consecutive, according to the U.S. Department of Labor. Contact your state unemployment office for more information.
If you were self-employed and then spent time on active duty in the U.S. military, you may be eligible for benefits from the Unemployment Compensation for Ex-service Members, or UCX, a program that provides benefits for eligible ex-military personnel. State agencies administer these benefits, and state laws determine how much is provided, the period that benefits are provided for and other eligibility conditions. In all cases, you must have been honorably discharged.
If Disaster Strikes
If you lose your livelihood, even temporarily, due to a major disaster, you can receive financial assistance under the federal Disaster Unemployment Assistance program. This program takes effect when a major disaster, natural or otherwise, has been declared by the president. It provides benefits to employees and self-employed people who worked, or were scheduled to work, in the disaster area at the time of the disaster and can't reach the workplace because of the disaster. It also applies if your workplace is gone or heavily damaged or you are injured in the disaster. Assistance begins on the first day of the week following the date the president makes a declaration and continues for up to 26 weeks. State unemployment compensation laws determine benefit amounts.
- Cornell University Legal Information Institute: Unemployment Compensation
- U.S. Department of Labor Employment and Training Administration: Unemployment Insurance Tax Topic
- U.S. Department of Labor Employment and Training Administration: Unemployment Compensation for Ex-servicemembers
- U.S. Department of Labor Employment and Training Administration: Disaster Unemployment Assistance (DUA)
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