Self Employed Unemployment Benefits

The Federal-State Unemployment Insurance Program provides unemployment benefits to workers, who have sufficient work and wages in covered employment and meet other eligibility requirements as prescribed by State law, provided the workers have been rendered unemployed due to no fault of theirs. Covered employment refers to work that comes under the purview of the Employment Security Law and on which taxes that fund unemployment insurance have to be paid and reports have to be filed when the wage liability criterion is met. In all but three states, unemployment insurance is funded solely by a tax that is imposed upon employers. Since, unemployment benefits are funded entirely by the employer, one wonders if 'self employed unemployment benefits' is a myth. The author hopes to answer the following questions regarding unemployment benefits for self employed individuals in the ensuing discussion:

• Are self employed eligible for unemployment benefits?
• If so, how can a self employed person file for unemployment?
• How long can a self employed person collect unemployment benefits?

Do Self Employed Unemployment Benefits Exist?
Self employed persons are eligible to collect unemployment benefits in the following situations:

Business Incorporated as S-Corp or C-Corp: If the self employed person's business is incorporated as a S-Corp, the entrepreneur's salary is subject to self employment tax although the shareholders' distributions are not subject to employment tax. In other words, the self-employed has effectively paid into the state's unemployment insurance fund and is thus eligible for unemployment benefits. A S-Corp is typically preferred for companies with 75 or fewer shareholders and confers upon the business the benefits of incorporation although it is taxed as if it were a partnership. Since the business is not taxed at the entity level, there is no problem of double taxation.

A self employed person, whose business is incorporated as a C-Corp, is also eligible for unemployment benefits since the the entrepreneur's salary is subject to self employment tax. Double taxation is the main disadvantage of a C-Corp since the income is taxed at the corporate level and then again on distributing it to the shareholders in the form of dividends. For information on ideas for self employment one may refer to the self employment ideas guide.

Unemployed on Account of Disaster: People, who have been rendered unemployed on account of an event that has been declared as a major disaster by the President of the United States, are entitled to receive disaster unemployment assistance provided they are not eligible for regular unemployment insurance benefits.
Paid Unemployment Taxes: Self-employed people, who have registered with the state authorities and have volunteered to pay unemployment taxes, are entitled to receive unemployment benefits since they have contributed to the state's unemployment insurance fund.

Filing for Unemployment Benefits If Self Employed
It is advisable to contact the State Unemployment Insurance agency soon after being rendered unemployed. People, who are eligible to collect unemployment benefits, should file their claims in accordance with the state's instructions regarding the same. In case of disasters, the victim is expected to file claims in accordance with announcements regarding the availability of Disaster Unemployment Assistance. Again, the State Unemployment Insurance agency may be contacted for further details regarding applying for unemployment benefits.

How Long can a Self Employed Person get Unemployment Benefits?
Typically, unemployment benefits are paid for a maximum of 26 weeks in most states. Disaster Unemployment Assistance is again available to victims starting with the first week of unemployment and continuing up to a period of 26 weeks provided the catastrophic event was declared as a disaster by the President. Benefits may be extended for an additional period of time if deemed necessary.

Hopefully, the above discussion would have dealt with the question, 'can I apply for unemployment if I am self employed'. Since self employed unemployment benefits are harder to come by, self employed individuals may benefit by purchasing private unemployment insurance that may come in handy during times of distress.