Do freelancers qualify for unemployment due to COVID-19?

When the U.S. shut down to help flatten the curve and spread of COVID-19, the economy took a hit that affected nearly everyone. As millions turned to unemployment assistance to supplement lost business, freelance workers across the nation watched in fear as work dried up and payments stopped coming.

If you are a gig-economy worker or independent contractor, you may be wondering about your options in the wake of the pandemic. Do you have access to COVID-19 stimulus funds? Can you even apply for unemployment? 

Yes, to both! For the first time, freelancers can access financial assistance from the government due to the loss of work. Below, we’ve explored unemployment access for self-employed workers to help you regain your equilibrium without giving up your freelancing career. Learn more about freelancer unemployment options and how to access them:

Do gig-economy workers/freelancers get unemployment during COVID?

On March 27, President Trump signed a $2 trillion stimulus package, known as the CARES Act, into law. This law gave self-employed workers access to unemployment insurance and small business loans for the first time in history, offering critical relief during a time of uncertainty and need. As a freelancer, it’s important to know what is available and how you can get access to it.

What kind of unemployment relief can I apply for?

As an independent or 1099 contractor, you can now apply for your state’s unemployment insurance. If you qualify, the payment you receive from the state will probably be about half of what you were earning before the COVID-19 pandemic. Each state has its own max amount, however, so you may not receive the same amount as those in other states. Florida, for example, caps payments at $275 per week. California, on the other hand, offers a maximum amount of $450 per week.

Along with money directly from the state, you can also qualify to receive additional unemployment assistance that was made available through the CARES Act. The Pandemic Unemployment Assistance (PUA) program provides an additional $600 per week for unemployment insurance, so you may even receive between $800-900 a week, if you qualify. The PUA program also extended benefits by four months, offering additional support while you look for more freelance jobs. 

Those eligible for unemployment in the U.S. under PUA include:

• Self-employed workers, including gig economy workers and independent contractors
• Workers who lack a sufficient work history to qualify under normal conditions
• People seeking part-time work
• Those on unemployment who have already maxed out their benefits

How do I apply for relief?

To apply, you’ll need to get in touch with your state’s unemployment office ASAP. Even if you worked in a different state than you live in, the office can help you file claims in other states. You will then follow your state’s specific application process, which is likely the same process for those seeking unemployment as a 1099 worker as it is for everyone else.

The biggest difference for you, as a self-employed worker, is the paperwork. For most applicants, states use W-2 forms to view previous earnings and work history. Since most gig economy workers don’t have W-2s, you will likely have to provide additional documentation. 

Before you start the application, make sure you have your 2019 tax return, pay stubs from 2019 and 2020, and any 1099 or W-2 forms that document your earnings at hand. This will hopefully help speed up the process. You can visit the Labor Department’s CareerOneStop portal to find your state’s documentation requirements. 

For self-employed workers, pay documentation, or a lack thereof, may ultimately determine if you qualify for these benefits. If you don’t have the paperwork you need, you can apply for financial assistance through outside grants, but you may not be able to access the government’s unemployment funds.

Additional coronavirus financial relief options for freelancers

Didn’t qualify for unemployment? Don’t start applying for corporate jobs just yet. There are a few other options that can help you get the relief you need:

SBA loans

The Small Business Administration is offering loans that can cover lost earnings or expenses such as rent. If you operate as a business entity, you can apply for one of these paycheck protection loans to receive an amount equal to 10 weeks of earnings. You may also be able to get this loan forgiven to eliminate future costs. This program quickly ran out of funding during its first round, but you can still apply for the next round of assistance.

Tax credits

If you have to take time off work because of the coronavirus, you can receive a tax credit that is equal to your average daily wages for every day that you can’t work. The Family First Coronavirus Response Act (FFCRA) offers up to 10 federally-funded paid sick days if you get sick, have to care for a loved one who is sick, or can’t work due to a shelter-in-place order or doctor-ordered self-isolation.

While you will claim your refundable tax credits on your Form 1040 tax return for 2020, you can get more immediate relief by subtracting the amount from your quarterly estimated taxes. For more information, read about the special provisions for independent contractors.

What do I do next?

Millions of workers are applying for government unemployment benefits, so it’s critical to act now. And, once you’ve completed your applications, check your status regularly.

Most importantly, don’t give up on your freelancing career. Use your newly freed time to find new projects, hone your skills, and reach out to former clients who may have new work. Don’t forget the reasons you got into freelance work and the reasons you stayed - your motivation is now more important than ever.

Want to hear more insider tips on running your freelance business? Discover Moxie for a better, more streamlined version of your business.