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Unemployment benefits

How it works
Self-employed individuals such as ICs do not usually qualify for unemployment benefits, but the CARES Act for the first time broadens the eligibility guidelines to include them—meaning qualifying ICs have a direct claim for unemployment benefits under their own tax ID. The expanded program runs through December 31, 2020, and provides retroactive benefits from January 27, 2020.

The revised benefits add 13 weeks of unemployment payments to most states’ usual 26, increasing availability from six to nine months. States are required to use the Disaster Unemployment Assistance Program formula to determine the amount received. An additional flat weekly sum will be added on top of that for the first 4 months someone collects unemployment.

Things to consider
ICs can apply for these benefits if they can prove they are either partially or fully unemployed, or unable and unavailable to work because of circumstances related to COVID-19. To do so, they will provide their own EIN or SSN when asked for their employer’s tax ID number. However, several possible concerns exist related to this process, including a lack of clarity related to the mechanisms a state unemployment agency will use to process such a claim and what happens if an IC incorrectly lists a contracting company as their “employer.” (See the sample response below if an IC lists your company as an employer.)

The CARES Act as it pertains to ICs does not reference contributions by an employer or contracting company of an IC-claimant, suggesting that it intends to offer federally funded unemployment coverage directly to the ICs (rather than employer-contribution funded). However, several possible concerns exist related to this process, including a lack of clarity related to the mechanisms a state unemployment agency will use to process such a claim and what happens if an IC incorrectly lists a contracting company as their “employer.” In addition, what happens to the supply chain if unemployment benefits exceed an ICs’ normal pay, causing ICs to opt for unemployment coverage over performing their usual services? Once again, these are questions to discuss with your legal counsel.

Additional resources
Sample Response to a CARES Act UI Claim