The $ 2.2 trillion federal coronavirus rescue program adopted in March has extended unemployment benefits to previously ineligible workers, such as the self-employed whose income has evaporated following the pandemic.
However, states must use the net (rather than gross) income that self-employed workers report on their tax returns to calculate their weekly jobless wages, according to a Department of Labor directive issued on April 27.
States use gross income to determine benefits for other workers.
Using the net income formula could make a big difference in unemployment benefits for some self-employed workers.
More than 33 million Americans have filed for unemployment benefits in the past seven weeks, according to the Department of Labor.
Barriers to unemployment
Net income reflects the total profit after costs and expenses that the self-employed can deduct from their taxes, such as those associated with a vehicle, travel, business insurance or office supplies.
The deduction of these costs, which could represent a lot of money, reduces net income and, by extension, their overall tax burden. But it could also reduce unemployment benefits.
” [It] certainly presents additional barriers for drivers, “said Mike Long, spokesperson for SEIU Local 721, a union representing over 95,000 public sector workers in southern California.
Gig workers such as drivers Lyft and Uber are currently organizing with the union as part of its Mobile Workers Alliance project.
The classification of drivers by carpoolers as independent contractors rather than employees pushes drivers to cover the costs associated with transporting passengers, said Long.
“If you spend $ 60,000 [income] up to $ 10,000, your income in the eyes of the government is really $ 10,000, even if your gross income was $ 60,000, “said Mark Pinto, secretary-treasurer of the Boston Musicians Association, a union representing about 1,700 professional musicians.
The quagmire of self-employment
The fall in net income comes on top of others, such as delays in the ability of states to accept and process the claims of the self-employed and others newly eligible for unemployment benefits under the rescue law. .
In addition, many self-employed workers earn both traditional W-2 wages and contract labor reported on 1,099 tax forms. But state unemployment offices generally look at W-2 earnings, which may be leaner, to determine their unemployment benefits.
“Actors, artists, musicians and all those who put their lives together [this way] end up in a real quagmire here, “said Pinto. Their income is not recognized on both sides. ”
Minimum unemployment benefits
There is however a silver lining for the self-employed.
The Coronavirus Relief Law, known as the CARES Law, establishes a minimum weekly benefit paid by a state to the self-employed.
Even if the self-employed’s net income is relatively low compared to the gross income, the individual would be entitled to receive at least half of the average weekly state benefits, for up to 39 weeks. .
This payment would be made through the unemployment pandemic assistance program created by the CARES law.