What Is an Unemployment Claim?
An unemployment claim is a request for cash benefits after getting laid off from a job. An individual makes an unemployment claim to the government of the state in which they worked to receive temporary payments after losing a job through no fault of their own. An unemployment claim is also known as an "unemployment insurance claim" or an "unemployment compensation claim."
The United States Department of Labor (DOL) keeps track of the number of weekly unemployment claims. It provides both seasonally adjusted and seasonally unadjusted claims numbers and also lists which states had an increase or decrease of 1,000 or more claims. This data is reported in the media as an indication of national and state economic health.
- An unemployment claim is an application for cash benefits that an employee makes after being laid off or being unable to work for other covered reasons, such as the COVID-19 pandemic.
- Employees who lose a job through no fault of their own—they are laid off, for example, or their place of business closes—may qualify for benefits.
- Employers pay into an unemployment insurance fund administered by the state.
- States pay for the actual benefits provided to workers, while the federal government pays administrative costs.
- As of January 2021, states have expanded the ability to provide UI to many workers affected by COVID-19, including people who aren't ordinarily eligible for unemployment benefits, such as gig workers and freelancers.
Who Can Claim Unemployment?
Unemployment claims are paid from state funds that are collected from employers in the form of an unemployment insurance tax. Unemployment benefits are payable for a limited number of weeks—most states provide up to 26 weeks of benefits—and are designed to replace about half of a worker's previous wages.
You must file an unemployment claim with the UI program in the state where you worked. Depending on the state, you can file a claim in person, online, or over the phone. When you file a claim, you must provide your Social Security number, contact information, and details about your former employment.
In addition, a worker must meet certain criteria. Workers who receive unemployment benefits, for example, must be actively seeking employment (and be able to prove it), and they must have been laid off rather than having quit or been fired.
The initial date of an unemployment claim determines the benefit year during which a claimant may file weekly claims—as well as the base period of the claim. The base period determines the wages that will be used to compute the claimant's weekly and maximum benefit amounts and for which employers will have potential chargeback or reimbursement liability for any benefits paid to the claimant. Only base period employers are part of an unemployment claim. Non-base period employers have no such liability.
Unemployment Claims and COVID-19
On March 27, 2020, former President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion coronavirus emergency stimulus package. It expanded states' ability to provide UI to many workers affected by COVID-19, including people who weren't ordinarily eligible for unemployment benefits. The CARES Act included three specific programs to help Americans out of work due to the coronavirus.
Certain aspects of these programs expired in July 2020 but have been restarted and modified following the passage of the Consolidated Appropriations Act (CAA), signed into law by former President Trump on Dec. 27, 2020. Here is a look at the different programs and how they have been impacted by the CAA Act.
- Under the CARES Act, the Federal Pandemic Unemployment Compensation (FPUC) program provided an extra $600 weekly benefit on top of regular unemployment insurance (UI) if an individual couldn't work due to COVID-19. The original program ended on July 31, 2020. Under the new CAA Act, the program will provide an extra $300 benefit on top of regular unemployment insurance for weeks of unemployment starting after December 26, 2020, and ending on or before March 14, 2021.
- The Pandemic Unemployment Assistance (PUA) program expands UI eligibility to self-employed workers, freelancers, independent contractors, and part-time workers impacted by the coronavirus pandemic. It was part of the CARES Act and has been extended under the CAA Act.
- The Pandemic Emergency Unemployment Compensation (PEUC) program allows workers to receive UI benefits for an extra 24 weeks after regular unemployment compensation benefits have been exhausted. Under the CARES Act, UI benefits were extended for an extra 13 weeks. Under the CAA Act, the benefit has been increased to 24 weeks. Including the standard 26 weeks of unemployment that a worker can apply for, the total number of potential weeks of UI now stands at 50.
On March 11, 2021, President Joe Biden signed the American Rescue Plan, extending the existing $300 per week federal unemployment supplement until September 6, 2021. This applies to the FPUC, PUA, and PEUC programs. A Senate amendment also made $10,200 ($20,400 for married couples filing jointly) of unemployment compensation paid in 2020 tax-free at the federal level for anyone earning less than $150,000. Keep in mind that states may not conform to these rules. Be sure to review your state return after clicking this link to see your state's rules.
The IRS announced it would automatically adjust the tax returns of anyone who filed early and declared all of their unemployment income for the 2020 tax year.
If you have applied or are planning on applying for unemployment insurance under the Pandemic Unemployment Assistance (PUA) program, be sure to check with your individual state to determine when your last PUA payment will be issued.
To find out the rules in your state, check with your state's unemployment insurance program. Most states recommend that you make an unemployment claim online, but be aware that in the first months of the pandemic, many states' websites crashed or were very slow. If you have delays in the filing, be aware that the benefits are available retroactively and the states will backdate claims to the date you first became unemployed.
When to File an Unemployment Claim
When you file an unemployment claim is very important. Consider, for example, an employer that hires an employee in March and lets that individual go after 30 days.
If the claimant files an initial claim before April 1, the base period would not include the first quarter of that year (the quarter in progress), nor the fourth quarter of the preceding year (the lag quarter). It actually consists of the fourth quarter of the year before the year preceding the current year, and the first three quarters of the year preceding the current year. However, since the employer did not report wages during that base period, it will have no financial involvement in the claim.
The same would apply if the claimant waited until April, May, or June to file the initial claim—in that case, the base period would omit the second quarter of the current year, the first quarter of the current year, and consist of the four quarters of the preceding year. If the ex-employee files an initial claim after June 30 of the current year, then the employer could be a base period employer, but its chargeback liability would be limited due to having paid only 30 days' worth of wages.