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Filing for Unemployment Benefits


Since the Great Depression, unemployment benefits have offered a lifeline to workers who suddenly find themselves jobless.  Chances are you, or someone close to you, has used this lifeline in the past or will at some point in the future.  Money while you are out of work sounds great, but keep in mind these important tips.  



Apply immediately.


The first principle you should be aware of is to apply for unemployment benefits immediately upon losing your job.  This is important for a few reasons.  First, the sooner you apply, the sooner you can begin receiving benefits.  Second, you will not receive “back pay” benefits if you delay applying; you will simply miss out on unemployment benefits for that period of time.  Finally, you may lose eligibility altogether if you wait too long.  


  • “Termination” and “separation” are generic terms used for losing your job, whether you or your employer initiates the action.  


State laws vary, but you are generally eligible for unemployment benefits if you become jobless through no fault of your own.  For example, you might be eligible for unemployment benefits if you are laid off or downsized, but not if you voluntarily quit or are terminated for cause (such as for misconduct).  


Those state laws can be tricky, though, so when in doubt, complete an application.  Apply through the unemployment office for your state.  (Check with that office for eligibility requirements.)  Usually this involves setting up an online account and filling out a form, including a description of the reason for separation.  


  • Apply through the unemployment office for the state where you worked, which may not be the state where you live or for which you have income taxes withheld.  


Your state unemployment office will make a preliminary determination of your eligibility.  If you are preliminarily eligible, the office will send a questionnaire to your former employer to verify the dates of your employment and their version of the events leading to your termination.  You will then be notified of the results of your application.  If you are denied, you should be given instructions for lodging an appeal.  



Benefits will not replace your full salary.


Unemployment benefits are funded through payroll taxes paid by your employer.  Like Social Security, they are based on a percentage of your taxable wages up to a certain limit (which varies by state) within a calendar year.  If you are approved for unemployment benefits, your benefit amount will only be a fraction of your wages.  You need to find another job to fully replace your lost income!  Do not wait until you receive a decision on your application; start the job hunt right away.  



Follow instructions from your state.  


If you are approved, you will receive instructions on how to access and maintain your benefits.  Common requirements include signing up for direct deposit (or debit card) and continuing to look for work.  For instance, you may need to follow certain steps each week to certify that you are actively looking for work.  States expect you to stay in the workforce if you are receiving unemployment checks.  Pay close attention to those instructions!  You do not want to miss out on benefits by forgetting a simple step.  


  • Fun fact:  The unemployment rate is the percentage of unemployed individuals to the total workforce.  You need to be registered with a state unemployment office to be considered “unemployed” for this purpose.  Individuals who leave the workforce (for example, retirees) are not considered “unemployed” because they are not looking for work.  


When you do eventually find work, notify your state as well.  If you receive unemployment benefits to which you are not entitled, you will be forced to repay them and could face additional penalties as well.  



Have taxes withheld from your benefit checks.  


The Internal Revenue Code defines gross income as “all income from whatever source derived,” and it is taxable unless specifically excluded.  Unfortunately there is no exclusion for unemployment benefits at the federal level.  (In 2020, there was a partial exclusion available for the first $10,200 in unemployment benefits received, so only amounts received above that were taxable.)  


As a result, your unemployment benefits will be taxed.  Be sure to have federal income tax withheld from unemployment benefits.  Usually this will be at a flat 10%, but withhold more (if your state allows it) if you are in a higher tax bracket, or set aside those additional funds in a high-yield savings account so you can pay a balance due when you file your tax return for the year.  Every year I see folks who received unemployment benefits for several months and are surprised they owe taxes because they did not have taxes withheld from their unemployment benefits.  Do not let that happen to you!  


If your state taxes unemployment benefits—many do not, in full or at least in part—be sure to have state income taxes withheld from your benefits as well.  



Keep your contact information updated.  


Once you apply for unemployment benefits, be sure to keep your state unemployment office informed of any changes to your address, phone number, or e-mail address—even after you stop receiving benefits.  This is important because you will receive a Form 1099-G the following January if you receive any unemployment benefits, even for just one week, during the year.  


Think of the 1099-G like a W-2 but for unemployment benefits.  Just as you need to notify a former employer of a new address so you receive your W-2, you need to notify the state unemployment office of a new address so you receive your 1099-G.  



Good luck with your job search!


When you are out of work, your job is to find a job.  (I realize that is easier said than done.)  It is especially important to take care of yourself during this time; do not neglect your health.  Consider reaching out to us for resume assistance—Xa is an expert!—to get the job you deserve. 

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