The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on Friday, March 27th, 2020 and went into effect on April 1st, 2020. This blog post focuses in on the expansion of unemployment benefits for individuals including the self-employed and individuals with limited work history.
The CARES Act has expanded unemployment benefits through the creation of the Pandemic Unemployment Assistance Program, effective through December 31, 2020 to covered individuals who are available and able to work but are unemployed or partially unemployed due to the any of the following:
- The individual has been diagnosed with COVID-19 or is experiencing symptoms and seeking a medical diagnosis
- A member of the individual’s household has been diagnosed with COVID-19
- The individual is providing care for a family or household member who has been diagnosed with COVID-19
- The individual is the primary caregiver for a child or other household member who is unable to attend school or another facility as a direct result of COVID-19
- The individual is unable to reach the place of employment because of a quarantine imposed as a direct result of COVID-19
- The individual is unable to reach the place of employment because of a quarantine imposed as a direct result of COVID-19
- The individual is unable to work because a health care provided has advised to self-quarantine due to COVID-19 concerns
- The individual was scheduled to commence employment and does not have a job or is unable to reach the job as direct result of COVID-19
- The individual has become the breadwinner or major support for a household because the head of household has died as direct result of COVID-19
- The individual has to quit his or her job as a direct result of COVID-19
- The individual’s place of employment is closed as a direct result of COVID-19
In addition, the CARES Act expanded unemployment benefits to independent contractors/self-employed and individuals with limited work history experiencing any of the events listed above. However, individuals who are receiving paid sick leave or other paid benefits are not eligible for unemployment benefits. Individuals who are working a reduced schedule, including those that have the ability to telework, may be eligible for partial unemployment benefits.
Under Section 2104 of the CARES Act, an individual eligible for unemployment benefits will receive payments of regular compensation in the amount that would be determined by the state law in which the individual applied for unemployment, plus an additional amount of $600 per week beginning April 5, 2020 through July 31, 2020.
Section 2102 of the CARES Act also expanded unemployment benefits for state programs from 26 weeks to 39 weeks adding an additional 13 weeks of benefits to be used if needed.
But how is the unemployment benefit received from state programs for self-employed individuals calculated with no wages to reference? A week of unemployment is calculated in accordance with section 625.6 of title 20, Code of Federal Regulations in which it states the base period for computing the benefit is the most recent tax year that has ended for the self-employed individual. The self-employment income to be treated as wages shall be the net income reported on the tax return of the individual from all self-employment that was dependent upon the performance of services by the individual.
What if multiple family members own the same business?
If multiple family members own the same business the net income from the self-employment is allocated equally among the members unless documentation is submitted supporting a different allocation.
What if the individual is self-employed less than full-time?
If the individual is self-employed less than full-time, the weekly amount is determined by calculating the percent of time the individual was self-employed compared to the customary and usual hours per week that would constitute the average per week hours for year-round full-time employment for the occupation, then apply the percentage to the determined 50% of the average weekly amount of regular compensation.
What if the individual has insufficient or no net income from self-employment?
If the weekly amount computed is less than 50% of the average weekly payment of regular compensation in the State where filed, or the individual has insufficient or no net income from self-employment in the applicable base period to compute a weekly amount, then the individual shall be determined entitled to a weekly amount equal to 50% of the average weekly payment of regular compensation in that state.
What is the maximum amount an individual can receive from state unemployment?
For the State of Michigan, the maximum weekly benefit amount is $362. In no event shall such amount be in excess of this maximum amount of regular compensation authorized under the applicable State law for that week.
What if the individual has not filed a tax return in prior years?
Any individual eligible for a weekly amount may submit necessary documentation to substantiate wages earned or paid during the base period, including cases where the individual has not filed a tax return.
If you have questions about how these expanded benefits might apply to your personal situation, please feel free to contact one of our CPAs at (616) 642-9467 or request a complimentary accounting consultation.
By: Karly Morris
Photograph: Cop Richards @ Freeimages.com
