Covid-19 Unemployment & Tax Relief for the Self-Employed

Mark Steber

Chief Tax Information Officer

Published on: July 08, 2020

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Traditionally, freelancers and gig workers have been unable to claim unemployment benefits. Independent contractors and their clients don't pay into state unemployment funds by default. However, with the unprecedented situation that the COVID-19 pandemic created, self-employed workers who otherwise wouldn't normally qualify for unemployment were eligible for payments.

Coronavirus-Specific Unemployment Benefits for the Self-Employed

Under the Department of Labor's Federal Pandemic Unemployment Compensation program (FPUC), an array of benefits were created to prevent the economy from going into freefall. This included providing the self-employed coronavirus benefits since many independent workers also lost their income and did not qualify and/or were unsuitable for small business aid like SBA loans and the Paycheck Protection Program.

However, while the CARES Act and subsequent temporary benefit programs it created are federal, unemployment is administered by your state's labor department. They may institute their own guidelines for employment eligibility, although there are a few basic conditions that must be met in order to receive pandemic unemployment assistance (PUA) payments:

Must be ineligible for regular unemployment benefits
Be unemployed or partially employed
Be unable to work due to health issues and/or economic fallout from COVID-19

You could be eligible to receive PUA benefits for up to 50 weeks provided you were unable or unavailable to work between January 27, 2020 to April 5, 2021.

How Do I Get Pandemic Unemployment Assistance if I'm Self-Employed?

If eligible, you will need to file for unemployment with your state. You should have documentation ready to prove your income. If requested, show your most recent tax return, 1099 forms, paid invoices, and other proof of payment. Note that requirements may vary by state.

In addition to receiving PUA, you may also be eligible to receive an extra $600 federal benefit per week until July 31, 2020. Please note that if you receive these payments, it may impact your ability to receive other small business aid such as SBA Economic Injury Disaster grants and PPP funds.

Will I Get a Stimulus Check if I'm Self-Employed?

Self-employment does not prevent you from receiving a stimulus check, provided your income and residency fall under the stimulus check guidelines. The stimulus eligibility guidelines for the stimulus payment include having an adjusted gross income (AGI) under $75,000 if single or married filing separately, under $112,500 if head of household, or under $150,000 if married filing jointly as of your latest tax return. If you were not required to file a tax return in 2018 or 2019, and you got a stimulus check this year, you should get one in the second round.

New Refundable Tax Credits for the Self-Employed Under the Families First Coronavirus Response Act

The Families First Coronavirus Response Act (FFCRA) was signed into law on March 18, making it the second major coronavirus-related bill. This bill's chief provisions include changes to paid sick leave, insurance coverage for COVID-19 testing, waivers for food assistance, and other pandemic-related aid. In addition to changing the work requirements for receiving SNAP benefits, the bill also provided paid sick leave to the self-employed in the form of a tax credit.

Both the Qualified Sick Leave and Qualified Family Leave tax credits have been made effective as of April 1, 2020 and end March 31, 2021 under the COVID-related Tax Relief Act of 2020.

How the Tax Filing Deadline Change May Affect the Self-Employed

The federal tax filing deadline is April 15, 2021 for your 2020 tax return. If you are unable to file your tax return by April 15, make sure you file an extension for the forms and pay your taxes by then. This will avoid any penalties for late filing pr paying.

About the Author

Mark Steber is Senior Vice President and Chief Tax Information Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.

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