Will federal unemployment benefits be reinstated or extended? Here’s what we know

Judges in Maryland and Indiana have now issued rulings requiring their states to continue paying pandemic unemployment aid. Both Maryland and Indiana were among the 26 states that chose to stop the extra benefits — which include $300 weekly bonus checks and coverage for freelancers — this summer, before their federal expiration on Sept. 6. Jobless residents in Texas have also filed a lawsuit seeking to bring back the aid that was cut off on June 26, though no decision has been made. 

Maryland was slated to end the pandemic coverage over the weekend, but a state judge issued a temporary restraining order requiring the state to continue participating. Governors have claimed that the supplemental federal money is preventing workers from filling open positions. Still, job searches haven’t picked up in the states that already ended benefits. The White House has said states can make their own decisions and that the federal government cannot intervene. 

Could these decisions help restore enhanced benefits in more states that opted out early? Or could there be a push to extend the benefits past September in other states? We’ll continue to update this story. In the meantime, you may be interested in IRS refunds going to those who were taxed on their 2020 unemployment benefits and which states are offering a back-to-work bonus. Here’s more information about the advanced child tax credit payments starting July 15. 

What do we know about Indiana and Maryland today?

This spring, both Indiana and Maryland joined some two dozen (mostly Republican-led) states that chose to discontinue federal unemployment benefits early. Then a judge ruled in late June that the Indiana governor’s decision to opt out had violated state law. The ruling said terminating jobless coverage was causing “irreparable harm” by eliminating the recipients’ ability to pay rent, basic medical expenses and child care. 

Despite that ruling, Indiana residents have yet to see their payments begin again, according to CNN. The state’s labor department claims it can’t restore the benefits, according to HuffPost, and the governor is appealing the judge’s injunction.

On July 3, right before pandemic programs were set to expire in Maryland, a judge ruled in favor of for unemployed residents who argued that the move to end the aid early also violated state law. The Maryland governor announced the state will fight the ruling. 

What are the expiration dates for unemployment benefits in each state?

Citing labor shortages, state governors say pandemic-related unemployment benefits produce limited incentives for workers to take jobs. Many economists and analysts disagree, noting that several factors are preventing people from finding suitable work — including low wages, lack of child care and fear of contracting COVID-19. 

Here are the end dates for the 26 states announcing an early halt to enhanced jobless benefits. (We kept Indiana and Maryland on this list, though the recent rulings mean that those benefits should be restored.) If your state is not listed below, those benefits are set to expire on Labor Day (Sept. 6). 

Some of those states, including Arizona, Montana, New Hampshire and Oklahoma, will instead offer financial incentives for individuals to find work. Louisiana Gov. John Bel Edwards said his reason for ending the benefits is to increase the maximum state unemployment benefit to $275 a week starting in 2022.

States that are not ceasing their participation in the enhanced federal programs could reimpose stricter rules — many of which were suspended during the pandemic — for those collecting unemployment. Hawaii, for example, is requiring jobless workers prove they are actively searching for work. 

Other states, like Colorado and Connecticut, are continuing the $300 payments but offering their own new-job bonuses. New York may also join in implementing signing bonuses for those who take and hold a job. Since each state has varying requirements, check with your state for rules.

How has the White House responded to states ending pandemic UI early?

Labor Department officials say their hands are tied and can’t counter decisions by state governors to stop participation in the national unemployment programs. 

Moreover, White House officials have indicated they will not continue the enhanced jobless benefits past September in the other states, saying they were intended to be temporary. In his latest speech on June 4 on May’s jobs report, Biden underlined that “it makes sense” for those supplemental unemployment benefits “to expire in 90 days.” 

In remarks on the economy in May, Biden had reaffirmed the guidelines for receiving federal unemployment insurance: “We’re going to make it clear that anyone collecting unemployment who is offered a suitable job must take the job or lose their unemployment benefits.” According to the Department of Labor, if you turn down a suitable job, you can be denied unemployment benefits: “You must be able, ready and willing to accept a suitable job.” 

What about PUA benefits for the self-employed and freelancers?

The March extension of unemployment benefits also applied to Pandemic Unemployment Assistance: aid for workers who aren’t normally eligible for unemployment insurance. It covers freelancers, gig workers, independent contractors and part-time workers. 

Most of the states that are cutting off the enhanced benefits are also stopping PUA and terminating the Pandemic Emergency Unemployment Compensation program. Online groups calling to extend pandemic unemployment programs through the crisis offer more information. The Department of Labor website tells individuals to contact their state’s unemployment insurance office for more details about these benefits. 

In a May 13 letter, Sen. Bernie Sanders appealed to the federal government to continue providing pandemic unemployment assistance to workers. Saying that jobless Americans will plunge into poverty in states slashing federal aid, he argued, “The PUA program has served as a backstop for our broken and outdated unemployment insurance (UI) system for over a year.”

What more is there to know about the extra $300 per week?

Unless your state is one of those that have opted out (see chart above), the enhanced unemployment benefits will continue until Labor Day, Sept. 6, granting a $300 weekly federal bonus on top of what the state pays. That extra money could 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 at the start of the pandemic last year, as of this April some 16 million Americans (one in 10 workers) were still receiving 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. 

While members of Congress had earlier pushed for the additional $300 to continue through the pandemic, many Republican and Democratic lawmakers are outright opposed or increasingly skeptical of the added benefit. 

Given Biden’s most recent remarks, it’s unlikely that those enhanced benefits will be renewed after Labor Day, but we will continue to follow the economic rebound and the debate over unemployment programs over the summer.

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What about the tax refund for 2020 unemployment benefits?

First, it’s important to know that the IRS treats 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 millions of unemployment benefit recipients had no taxes withheld, which means they would’ve owed a substantial amount when filing tax returns. 

To counter that, the March stimulus law included 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 2020. That means the first $10,200 of unemployment insurance will not be taxable — so if someone received $20,000 in benefits in 2020, they would only be taxed on $9,800 of it. The $10,200 is the amount of income exclusion for single filers, not the amount of the refund. (The amount of the refund will vary per person.)

Some states are not providing a tax break. According to a chart by the tax preparation service H&R Block, 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 only offering a partial tax break.

Some 13 million taxpayers who received jobless benefits last year and paid taxes on the money are eligible, though not everyone will receive a refund depending on past-due debt. We explain what you need to know here, including how to look for that refund on your tax transcript. 

When is the IRS sending out unemployment tax refunds?

After some initial delays, more single filers began seeing deposits in their checking accounts starting May 28, with 2.8 million refunds going out the first week of June. As of June 9, over 1.2 million direct deposit payments had gone out in the two previous weeks, adding up to over $2.2 billion. The IRS said the next set of refunds would go out mid-June, but those are yet to be confirmed — although some Twitter users reported receiving their refunds. More complicated returns will be processed later, with refunds being issued over the summer. 

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. 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.

What is Mixed Earner Unemployment Compensation?

For the first time, the original CARES Act in early 2020 allowed some self-employed workers to temporarily qualify for unemployment benefits. 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, a person who made substantial income from self-employment or a contracting job could receive an extra $100 a week. MEUC was also extended with the American Rescue Plan Act until Sept. 6, though some states are bowing out of that aid as well. 

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. 

Are there more details about states ending jobless 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 current package, federal unemployment insurance will be extended through Labor Day, offering a total of 53 weeks of additional benefits — except for states opting out. 

While many states have automatically renewed unemployment insurance benefits, some recipients may have issues when they reach the benefit year-ending date. States limit benefits to one year, and that compensation is typically cut off after that date. Many 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. 

Can you still apply for unemployment benefits in 2021?

If you’ve been laid off or furloughed, you’re qualified to apply for unemployment benefits in 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 isn’t a 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 federal Department of Labor updated its eligibility requirements to include people who refused to return to work due to unsafe coronavirus standards.