Jobless Americans in states opting out of enhanced federal unemployment insurance face struggles to make ends meet.
Sarah Tew/CNETAs the list of states canceling extended federal unemployment benefits continues to grow, unemployed Americans will be saddled with a heavy financial burden this summer. Currently, some 3.6 million people in 22 states are projected to lose out on the $300 weekly federal bonus checks, with about 2.7 million at risk of seeing their benefits wiped out entirely. That extra $300 payment per week, as well as the extension of benefits until Sept. 6 and the allocation of pandemic unemployment assistance to the self-employed, had been codified under the American Rescue Plan in March.
This week, Labor Department officials reportedly revealed that there is no way for the federal government to intervene in the matter. In other words, the White House cannot step in and provide jobless benefits to those who will get cut off, nor can it force state governors to pay out the extra federal benefits. What does that mean if you're unemployed? We'll tell you what you need to know, including how the IRS has started refunding millions to those taxed on their 2020 unemployment checks.
Here's the latest about the advanced child tax credit payments starting in July and stimulus "plus-up" payments. You might also be interested in how you could get thousands back for child care expenses -- like day care costs -- with the new child tax credit. This story has been updated recently with new information.
Which states are opting out of federal unemployment programs early?
So far, 22 states -- including most recently Texas, Indiana and New Hampshire -- have announced plans to cancel the enhanced pandemic-related unemployment benefits. Citing labor shortages, state governors claim that enhanced unemployment coverage discourages workers from taking jobs. Some economists and analysts disagree, noting that several factors are preventing people from finding suitable work, including lack of child care and fear of contracting COVID-19.
A few days after Montana reported its withdrawal from pandemic-related unemployment programs on May 4, the US Chamber of Commerce called for an end to the $300 weekly federal bonus. Other states soon followed. Here are the states that have announced an early halt to enhanced jobless benefits, which are otherwise set to expire on Labor Day:
- Alabama
- Alaska
- Arizona
- Arkansas
- Georgia
- Idaho
- Indiana
- Iowa
- Mississippi
- Missouri
- Montana
- New Hampshire
- North Dakota
- Ohio
- Oklahoma
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- West Virginia
- Wyoming
The official withdrawal varies state to state, with some ending their participation in July and others as early as June 12. Some of those states, like Arizona, Montana, New Hampshire and Oklahoma, will offer financial incentives for individuals to find work.
Other states that are not ceasing their participation in federal programs will reimpose stricter rules -- many of which were suspended during the pandemic -- for those collecting unemployment. Hawaii, for example, is requiring that jobless workers prove they are searching for work.
Some 3.6 million Americans will see their unemployment checks slashed or wiped out this summer.
What is the Biden administration's response to states cutting off unemployment benefits?
In his remarks on the economy on May 10, President Joe Biden responded to states canceling pandemic jobless benefits and reaffirmed the guidelines for receiving federal unemployment insurance. "We're going to make it clear that anyone collecting unemployment who is offered a suitable job must take the job or lose their unemployment benefits," Biden said. "That's the law."
According to the Department of Labor, if you turn down a suitable job, you can be denied unemployment benefits: "You must be able, ready and willing to accept a suitable job." The New York Times reported that the Biden administration asked the Labor Department to make sure unemployed workers cannot continue to draw benefits if they turn down a suitable job offer.
This week, Labor Department officials reported that their hands were tied and could not counter decisions by state governors to stop their participation in the national unemployment programs.
If I receive unemployment benefits, can I get the weekly $300 supplement?
The most recent COVID relief package extended enhanced unemployment benefits until Labor Day (Sept. 6), with a $300 weekly federal bonus on top of what the state pays. That extra $300 a week could allow unemployment recipients to receive a total of up to $7,500 for the 25 weeks spanning from March to September -- unless your state is one of those that has recently opted out.
While unemployment rates are lower than they were last year at the start of the pandemic last year, as of this April some 16 million Americans (1 in 10 workers) were still receiving some kind of jobless aid. According to the Bureau of Labor Statistics, more than one in four jobless Americans have been without unemployment for over a year.
In 2020, as part of the CARES Act, those receiving unemployment were eligible for an additional $600 weekly until the end of last July. Weekly bonuses picked up again with last year's December relief package, but for half the amount, $300. It doesn't appear that the renewed $300 weekly bonuses can be applied retroactively.
Could the federal bonus payments extend beyond September?
It's possible. But much depends on what happens with the economic rebound over the summer and the debate over unemployment programs.
For example, while some members of Congress have pushed for the additional unemployment insurance money to continue through the pandemic, other lawmakers are outright opposed or increasingly skeptical of the added benefit, according to Politico.
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What else is there to know about unemployment benefits and state cutoffs?
States have a limit on how many weeks a person can stay on unemployment. Most provide 26 weeks, with some granting as few as 12 weeks and others as many as 30 weeks. Before the American Rescue Plan, the federal government had extended pandemic relief benefits to the unemployed an additional 24 weeks. Under the current package, federal unemployment insurance will be extended through Labor Day 2021, offering a total of 53 weeks of additional benefits -- except for states opting out.
While many states have automatically renewed unemployment insurance benefits, some recipients may have issues when they reach the benefit year ending date (PDF). States limit benefits to one year, and that compensation is typically cut off after that date. Many states require recipients to either file a new claim or request an extension. Because it varies from state to state, those who have been unemployed for at least a year should get in contact with their state's labor department.
What about jobless benefits for the self-employed, or PUA?
In most states, the extension of pandemic-related unemployment benefits also applies to PUA, which is assistance for workers who aren't normally eligible for UI. PUA covers self-employed individuals, like freelancers or gig workers, as well as independent contractors and part-time workers.
Some states that are cutting off the enhanced benefits are also stopping aid to those collecting PUA. In other states, like Arizona, residents can still receive PUA but will lose the $300 weekly benefits.
In a May 13 letter to the Department of Labor (PDF), Vermont Sen. Bernie Sanders appealed to the federal government to continue providing pandemic unemployment assistance to workers. Stating that jobless Americans will plunge into poverty in states slashing federal aid, the letter noted: "The PUA program has served as a backstop for our broken and outdated unemployment insurance (UI) system for over a year."
How is eligibility determined for the unemployment tax break?
First, it's important to know that the IRS treats unemployment insurance as income, which means it's subject to taxation. In most cases, the state can withhold taxes like a typical paycheck. However, it's estimated that 10 million unemployment benefit recipients had no taxes withheld, which means they would owe a substantial amount when filing tax returns.
To counter that, the March stimulus law includes a tax exemption of $10,200 (or up to $20,400 for those filing jointly) for those with an adjusted gross income under $150,000 during the 2020 year. How does the exemption in the new legislation work? The first $10,200 of unemployment insurance will not be taxable, so if someone received $20,000 of benefits in 2020, they will only be taxed on $9,800 of it.
Some states are not providing a tax break. According to a chart by the tax preparation service H&R Block (PDF), 11 states aren't offering the tax break: Colorado, Georgia, Hawaii, Idaho, Kentucky, Minnesota, Mississippi, New York, North Carolina, Rhode Island and South Carolina. Other states, like Indiana and Wisconsin, are offering a partial tax break.
When and how can I get the refund on unemployment taxes?
According to the Department of the Treasury, some 7.3 million people (PDF) are already eligible to receive unemployment tax refunds. The IRS has already started sending the first round of tax-break refunds to those eligible. The agency will continue to issues refunds through the summer as it processes tax returns and reviews taxes paid on 2020 unemployment benefits.
The IRS has issued instructions on how to enter the exemption on tax forms. People who already filed their taxes this year without the exemption will have their returns automatically recalculated by the IRS. (Those refund checks will start going out in May.) While the IRS has said that taxpayers do not need to file an amended federal tax return to get their tax break, a handful of states are requiring taxpayers to file an amended state tax return to get a state refund. Here's how to find out your state's rules.
How is eligibility determined for Mixed Earner Unemployment Compensation?
For the first time, the original CARES Act in early 2020 allowed some self-employed workers to temporarily qualify for unemployment benefits. The December 2020 stimulus bill had added additional compensation for someone earning a mixed income from a traditional job and employment as a contractor, who would either receive the unemployment insurance payment or PUA, but not both.
With the Mixed Earner Unemployment Compensation program, or MEUC, a person who made substantial income from self-employment or a contracting job could receive an extra $100 a week. The MEUC has been extended with the American Rescue Plan Act until Sept. 6.
For example, let's say you made $50,000 in 2019, which was split between $30,000 from a contractor job and $20,000 from a part-time job at a company. If you were laid off, the state unemployment office would calculate whether you'd receive benefits for the $30,000 via PUA or $20,000 via unemployment insurance, but not a combination of the two.
Though someone who works a traditional job and makes $50,000 a year in New York would receive $480 a week from unemployment insurance, by having a mix of the two you'd get the greater of the two different amounts, which would be the PUA of $288 a week rather than the $280 from unemployment.
Mixed Earner Unemployment Compensation will now give that person an extra $100, but only if the state participates. It may still be some time before certain states determine whether or not they will implement the MEUC program.
How do I apply for unemployment insurance?
If you've been laid off or furloughed, you're qualified to apply for unemployment benefits from the state where you live. Once the state approves your claim, you can apply to receive whatever state benefits you're entitled to. Because states cover 30% to 50% of a person's wages, there's no single sum you could expect on a national basis. Each state's labor office provides information about its particular unemployment benefits.
Eligibility criteria vary from state to state, but the general rule is that you should apply if you've lost your job or been furloughed through no fault of your own. This would include a job lost directly or indirectly because of the pandemic.
In February, the Department of Labor updated its eligibility requirements to include people who refused to return to work due to unsafe coronavirus standards.
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