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Unemployment Benefits – How to File and Other Frequently Asked Questions

how to report unemployment on taxes

Unemployment sucks. I know – I’ve been there before. I was unemployed for 5 months after I separated from The USAF. It wasn’t that I didn’t want to work, far from it. I just had a difficult time finding work. The fact that I relocated across the country and didn’t have a network to tap into made finding a new job an even more difficult task.

The good news is that unemployment insurance is there to help you bridge the gap between jobs. Here is what you need to know about unemployment insurance and how to claim unemployment:

What is unemployment insurance?

Federal Unemployment Insurance is a safety net designed to assist workers who are unemployed through no fault of their own. Federal Unemployment Insurance is run by your local state government but is funded by federal and state taxes which are paid by employers.

How to qualify for unemployment benefits

Each state is has its own requirements regarding unemployment benefits eligibility, so be sure to check with the state in which you are filing. In general the following rules will apply:

No fault loss of employment. Most people who become unemployed through no fault of their own are eligible to file unemployment benefits. Most people will be eligible for unemployment benefits if they were laid off for lack of work, and sometimes if you are put on a leave of absence, such as a temporary plant closing, or seasonal work. You may also be eligible for other reasons of unemployment, such as being out of work due to a natural disaster, employer went out of business, job moved overseas, you completed your military obligation, or other reasons. Be sure to check with your state regarding your particular situation.

Must be physically able to work. You must be physically able to work, available for work, and actively seeking suitable work. Suitable work is generally considered employment in an occupation in line with your prior training, education, and experience. Work may not be considered suitable if the wages, hours, or working conditions are not as favorable as most jobs in your occupation in the local labor market or if you are not physically able to perform the work.

Note. If you are physically unable to perform work due to a disability, you may not be eligible for unemployment benefits. This is because unemployment benefits and disability benefits come out of different pots of money. If you are physically unable to perform work, you should look into state disability benefits.

Where to file for unemployment benefits

Each state is responsible for running its unemployment office. A complete list of state unemployment offices can be found at the US Department of Labor Workforce Security site .

When you should file for unemployment benefits

You should file for unemployment benefits as soon as possible. because you can only receive benefits in weeks which you file a claim. Most states have a 1-2 week waiting period, but you must still file to get on the books and continue filing each week that you remain unemployed. Provided that your unemployment benefits claim is approved, you will most likely receive your first unemployment check during your second or third week of unemployment, depending on your state’s unemployment benefit rules.

How to file for unemployment benefits

Gather your information. You will need to provide your state labor board (or other governing agency) with your personal and work information. Be prepared to provide your SSN, employment history for the previous 2 years (employer name, location, position held, etc.), date you last worked, wage history, union information if applicable, DD Form 214 if recently separated from the military, education level, and possibly other information.

Apply online, by phone, or in person. Different states have different setups, but most states now offer online unemployment benefits application, as well as by telephone or in person. In some states it is mandatory to meet with a career assistance advisor at some point.

Delay in approval? Keep filing weekly claims. If your application is not approved right away, that does not mean you are not or will not be eligible for unemployment benefits. Sometimes an extra form needs filled out of more information about your claim is needed. Keep filing for unemployment benefits because you may receive benefits in arrears. If you wait for a decision, you will not receive benefits for weeks in which you did not file a claim.

How much money will you receive for unemployment insurance?

The amount of money you receive for your weekly unemployment benefit will vary depending on your earning history and the limits of your state. When I filed for unemployment benefits in Texas I received $300 per week, however, some states offer more (the national

average is $300 per week).

Unemployment benefits are taxable. Pay attention to the income tax question! Unemployment benefits are considered taxable income for federal income taxes. Taxes are not automatically taken out of your check, so if you want to avoid an unexpected surprise when you file taxes the following year, it may be a good idea to have taxes taken out when you receive your benefits. If you choose to have taxes withdrawn, the IRS will automatically withdraw 10% of your unemployment benefits.

Receiving unemployment benefits

File weekly claims. Most states require people receiving unemployment benefits to file a weekly claim with their state. This means you need to call in and verify that your status has not changed. You can expect to go through an automated phone system that asks whether you are still physically able to perform work, if you are actively seeking work, if you earned any income in the previous week, and if anything about your situation has changed.

Get paid weekly or biweekly. Each state determines how often they pay unemployment benefit recipients, but it payment is usually weekly or biweekly. Be sure to check with your state’s unemployment board.

Keep accurate records! States require that you maintain a job search while receiving unemployment benefits, and your need to keep records verifying that you are searching for work – you must generally make 3 job searches per week, by either contacting employers, submitting resumes, or going to interviews. Tracking your job search efforts includes maintaining a list of jobs applied for or applications submitted. Many states give you a Job Search Log to make tracking easier. Make sure you keep accurate records because they can audit you later and you can lose your benefits if they discover you are not actively seeking new work.

Report any earnings. You can still take on work while receiving unemployment benefits, but you must report it and your earnings will reduce the amount of benefits you receive. Still it is better to earn some money through part time work than to do nothing at all. If you fail to report any earnings, you will have to pay back any benefits you received, plus interest. If you knowingly fail to report earnings, you may be charged with fraud, which can result in a denial of benefits and additional penalties.

Receive benefits by check or direct deposit. Most states offer both options for receiving unemployment benefits. I recommend receiving your unemployment benefits by direct deposit if you have a bank account – that way you do not have to pay check cashing fees or wait for the mail, which can be unpredictable. Direct deposit means you will receive your benefits more quickly. If you need access to a good online bank, I recommend Capital One 360 or another free high interest savings account that offers easy access.

How long can you claim unemployment benefits?

Time limits of unemployment benefits. The length of time that benefits are available is determined by the State in which you file an unemployment insurance claim. Benefits can be paid for a maximum of 26 weeks in most states, however, due to the current global economic crisis and mass layoffs in the United States, the US government and many states recently approved emergency unemployment compensation (EUC), which extended unemployment benefits for certain individuals.

Unemployment Insurance Extended Benefits. The basic Extended Benefits program provides up to 13 additional weeks of benefits when a State is experiencing high unemployment (usually over 6%, but check with your state). Some States have also enacted a voluntary program to pay up to 7 additional weeks (20 weeks maximum) of Extended Benefits during periods of extremely high unemployment. Not everyone who qualified for regular benefits qualifies for Extended Benefits. The State agency will advise you of your eligibility for Extended Benefits.

Other possible benefits

Along with unemployment benefits, you may be eligible to claim COBRA insurance coverage through your former employer. Be sure to contact your former employer or health insurance provider for more details.

Unemployment Benefit Provisions in the 2009 Economic Stimulus Plan

Update: The 2009 economic stimulus plan calls for an increase in unemployment and COBRA benefits. Be sure to visit this article for more information about increases in benefits you may be eligible to receive.

Unemployment Benefits are there for you

Losing your job is a difficult experience, but thankfully we have unemployment insurance to fall back on. With a positive attitude and a little luck, hopefully you won’t need to claim unemployment very long.

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