Unemployment FAQs Under the New COVID-19 Legislation

April 27, 2020 Posted by: Category: Blog No comments

We keep getting asked questions about unemployment under the new COVID-19 rules.

First, I want to say that I am no expert on payments and qualifications for unemployment even under normal circumstances, and I have little or no expert guidance on this new situation.
Everything mentioned below is my best assessment of the new rules, not as an expert on this matter, and each state may follow different guidelines.

For this and any other questions on Covid19 go to our site at http://smarttaxadvisor.com/faq/covid-19-updates/
If you think your question was not answered, please send an email and we will update our Q&A with your answer for all to see.

For questions on whether you should take the PPP versus unemployment, see “Is the PPP Loan For You?

 

WHAT AMOUNTS QUALIFY FOR CALCULATION OF UNEMPLOYMENT?

Those on payroll can usually collect an amount based on their annual wages.

Corporations

If you own your own company, whether a Corporation or S-Corporation and took a payroll, the wages are what counts.  For S Corporations or Partnerships, it is NOT the amount you take out for distributions or withdrawals.

NOTE:   If you have an S Corporation and did not set up a legitimate payroll, the DUA may determine that you have no earnings that qualify.  Many of you had us do a workaround that we have previously told you was risky with the IRS.  Now, this choice may also cause you to not be able to collect unemployment nor qualify for PPP loan forgiveness.  I would attempt to tell them you should qualify for net earnings for self-employment.

 

Self-Employed and Partnerships

Self-Employed under the new COVID rules will be able to collect based on their net earnings from Self Employment.  That usually means your schedule C net earnings if you are a sole proprietor or Single-member LLC (SMLLC).  It does NOT mean net income from Rentals on Schedule E.

For Partnerships, net earnings are the amount listed on your K-1 as net earnings from Self Employment.  It MAY include guaranteed payment to partners if it is also subject to self-employment taxes.

 

CAN YOU COLLECT IF YOU HAVE MONEY FROM DEALS OR OTHER INTERMITTENT COMPENSATION?

For businesses that have deals pending and/or working their business, I don’t see how you can collect unemployment.  But, I have been asked what happens if you qualify for unemployment and have intermittent money coming in:

If you receive money from prior activities, it is my opinion that it is not reportable earnings for the current period while on unemployment.

For example, if you receive a commission on a deal the amount to report to DUA may be the net earnings.   E.G.  if your Schedule C earnings are 50% of gross commissions I would report 50% of what you receive.

For daycare providers who are still receiving payments from the state, I can’t really answer what DUA expects from you.  I would ask the DUA.

For additional questions, visit our COVID-19 UPDATES & FAQs page.

About 

Paul Dion - Speaker, Author, and Tax Advisor - has been planning and preparing returns for business owners for over 25 years with a specialty in helping real estate agents and investors. His passion is to help business owners legally pay the least amount of tax using court-tested and IRS-approved tax strategies. In addition, he continues to advance service offerings to include income saving strategies designed to deliver higher profits to your business.