Montana cancels $300 unemployment bonus checks and everything else to know

The governors of Montana and South Carolina have said their states will cancel the $300 federal bonus and scale back on benefits for unemployed workers starting in June. The $300 weekly bonus, on top of what states already pay in unemployment checks, is part of the American Rescue Plan law from March that extends the $300 payments through Sept. 6. However, states are entitled to opt out.

Governors for the two states say they’re facing a labor shortage, with South Carolina Gov. Henry McMaster saying in a statement, “This labor shortage is being created in large part by the supplemental unemployment payments that the federal government provides claimants on top of their state unemployment benefits.”

That’s just the tip of the iceberg for the $300 unemployment checks. We’ll tell you everything you need to know now, including how the IRS could refund you up to $10,200 if you were taxed on your unemployment checks as income. (The deadline to file is May 17.) Here’s what to know about July’s child tax credit checks and stimulus check “plus-up” payments. You may also want to see if the IRS owes you more tax refund money and how you could get $16,000 back in child care expenses like day care. This story has been updated with new information. 

Why are Montana and South Carolina canceling the $300 weekly unemployment bonuses? 

The governors of Montana and South Carolina opted to halt their participation in unemployment benefits related to the pandemic. That means in June, unemployed workers in those states will not receive the $300 weekly bonus on top of other unemployment money they would receive from each state. South Carolina and Montana will also end payments to those receiving Pandemic Emergency Compensation and Pandemic Unemployment Assistance, which includes gig and contract workers. 

Though the funding for the pandemic unemployment benefits was granted by law from the federal government, individual states can choose not to participate. 

The US Chamber of Commerce on May 7 called for an end to the $300 federal bonus, which may mean the termination of these benefits could happen elsewhere. We will continue to monitor any changes. 

What is the $10,200 unemployment refund? Do I qualify? 

The IRS views unemployment insurance as income, which means it’s subject to taxation. In most cases, the state can withhold taxes like a typical paycheck. However, it’s estimated that 10 million unemployment benefit recipients had no taxes withheld, which means they would owe a substantial amount when filing their tax return. 

To counter that, the most recent stimulus law includes a tax exemption of $10,200 (or up to $20,400 for those filing jointly) for those with an adjusted gross income under $150,000 during the 2020 year. How does the exemption in the new legislation work? The first $10,200 of unemployment insurance will not be taxable, so if someone received $20,000 of benefits in 2020, they will only be taxed on $9,800 of it. According to the Treasury Department, some 7.3 million people (PDF) are already eligible to receive unemployment tax refunds.

The IRS has issued instructions on how to enter the exemption on tax forms. People who already filed their taxes this year without the exemption will have their returns automatically recalculated by the IRS. (Those refund checks will start going out in May.) While the IRS has said that taxpayers do not need to file an amended federal tax return to get their tax break, a handful of states are requiring taxpayers to file an amended state tax return to get a state refund. Here’s how to find out your state’s rules.

Also, keep in mind that some states are not providing a tax break. According to a recent chart by the tax preparation service H&R Block (PDF), 11 states aren’t offering the tax break: Colorado, Georgia, Hawaii, Idaho, Kentucky, Minnesota, Mississippi, New York, North Carolina, Rhode Island and South Carolina. Other states, like Indiana and Wisconsin, are offering a partial tax break. 

I receive unemployment benefits. When will I get the extra $300 a week and for how long?

The recent $1.9 trillion COVID-19 relief package extends enhanced unemployment benefits until Labor Day, Sept. 6, with a $300 federal bonus on top of what your state pays. The supplemental benefits were supposed to begin last month, but they may not arrive until later. Once the payments pick up, the extra $300 could potentially allow unemployment recipients to receive a total of up to $7,500 for the 25 weeks spanning from March to September. 

While unemployment rates are lower than they were last year at the start of the pandemic, as of last month some 16 million Americans (one in 10 workers) continue to receive some kind of jobless aid. According to the Bureau of Labor Statistics, more than one in four jobless Americans have been without unemployment for over a year. 

In 2020, as part of the CARES Act, those receiving unemployment were eligible for an additional $600 weekly until the end of last July. Weekly bonuses picked up again with last year’s December relief package, but for half the amount, $300. It doesn’t appear that the renewed $300 weekly bonuses can be applied retroactively. 

Could the federal bonus payments extend beyond Sept. 6? 

It’s possible, of course, but much depends on what happens with the economic rebound over the summer. We expect the conversation to continue in Congress as the Sept. 6 deadline approaches.

More things to know about bonus unemployment benefits 

States have a limit on how many weeks a person can stay on unemployment. Most provide 26 weeks, with some granting as few as 12 weeks and others as many as 30 weeks. Before the American Rescue Plan, the federal government had extended pandemic relief benefits to the unemployed an additional 24 weeks. Under the new package, unemployment insurance will be extended through Labor Day 2021, offering a total of 53 weeks of additional benefits. 

The extension of these benefits also applies to PUA, which is assistance to workers who aren’t normally eligible for unemployment insurance. PUA covers self-employed individuals, like freelancers or gig workers, as well as independent contractors and part-time workers impacted by the pandemic. 

While many states have automatically renewed unemployment insurance benefits, some recipients may have issues when they reach the benefit year ending date (PDF). States limit benefits to one year, and that compensation is typically cut off after that date. Though the American Rescue Plan extends unemployment insurance, states require recipients to either file a new claim or request an extension. Because it varies from state to state, those who have been unemployed for at least a year should get in contact with their state’s labor department. 

What about Mixed Earner Unemployment Compensation and qualifications?

For the first time, the original CARES Act
 in early 2020 allowed some self-employed workers to temporarily qualify for unemployment benefits through PUA. The December 2020 stimulus bill had added additional compensation for someone earning a mixed income from a traditional job and employment as a contractor, who would either receive the unemployment insurance payment or PUA, but not both. 

With the Mixed Earner Unemployment Compensation program, or MEUC, a person who made substantial income from self-employment or a contracting job could receive an extra $100 a week. The MEUC has been extended with the American Rescue Plan Act until Sept. 6. 

For example, let’s say you made $50,000 in 2019, which was split between $30,000 from a contractor job and $20,000 from a part-time job at a company. If you were laid off, the state unemployment office would calculate whether you’d receive benefits for the $30,000 via PUA or $20,000 via unemployment insurance, but not a combination of the two. 

Though someone who works a traditional job and makes $50,000 a year in New York would receive $480 a week from unemployment insurance, by having a mix of the two you’d get the greater of the two different amounts, which would be the PUA of $288 a week rather than the $280 from unemployment. 

Mixed Earner Unemployment Compensation will now give that person an extra $100, but only if the state participates. It may still be some time before certain states determine whether or not they will implement the MEUC program.

What are the requirements for receiving unemployment insurance?

If you’ve been laid off or furloughed, you’re qualified to apply for unemployment benefits from the state where you live. Once the state approves your claim, you can apply to receive whatever state benefits you’re entitled to. Because states cover 30% to 50% of a person’s wages, there’s no single sum you could expect on a national basis. Each state’s labor office provides information about its particular unemployment benefits.

Eligibility criteria vary from state to state, but the general rule is that you should apply if you’ve lost your job or been furloughed through no fault of your own. This would include a job lost directly or indirectly because of the pandemic. 

In February, the Department of Labor updated its eligibility requirements to include people who refused to return to work due to unsafe coronavirus standards.