Employee or Independent Contractor?

Here’s What the Relief Packages Give Self-Employed Workers

From The New York Times,   provides an outstanding summary of the benefits available to self-employed workers. Tara writes:

It’s not quite as straight ahead as a traditional sick day, but if you’re self-employed you now have the equivalent of paid sick leave, in the form of a tax credit that can reduce your tax burden or result in a refund.

The credit is available for time taken from April 1 through the end of the year, and must be claimed on your income tax return for 2020. But the credit can be used to help your cash flow sooner than that (assuming your income hasn’t completely dried up): You can reduce your estimated quarterly tax payments by the dollar amount of your leave taken.

You can claim the credit for up to 10 sick days in total, and you don’t need a coronavirus diagnosis (or even to be ill) to take them. The credit applies if you’ve been ordered to stay at home by the local, state or federal government or if a health care provider suggested that you isolate yourself.

To calculate your credit, you must determine your average daily income. Take your net earnings (earnings after expenses) and divide that by 260. Then multiply the number of sick days by that figure or $511, whichever is less.
 

Beyond the sick-leave credit, self-employed people can take paid caregiving leave if their child’s school is closed or their typical child care provider is unavailable because of the outbreak. This works similarly to the sick leave credit — 67 percent of your average daily earnings, up to $200 a day. But the caregiving leave can be taken for 50 days.

While the 10 days of sick leave can be used for more reasons, family leave is more restrictive, according to guidance from the Department of Labor, and should be used accordingly.

The federal response to the pandemic includes an expansion of unemployment benefits to self-employed people who typically are not eligible.

There is an additional pot of money to draw from for these workers, through the so-called pandemic unemployment assistance program, which will be administered through the states. It covers a loss of income for a variety of coronavirus-related reasons, from having to care for a child whose school has been closed to a workplace that has had to shut down.

(Whether it’s better for you to take the caregiving leave credit or unemployment to care for your child will depend on your circumstances. A representative for the Labor Department said it was working to clarify the rules.)

Self-employed workers should apply for benefits through the unemployment program in the state where they worked, but it may not be easy. Many states are modifying their systems and retraining staff to accommodate newly eligible self-employed workers.

For applicants to qualify for pandemic benefits, the state must first determine that they are ineligible for regular benefits. Each state will have its own process for applicants to follow. In New York, for example, self-employed applicants cannot apply for pandemic unemployment assistance until they have applied and been rejected for regular unemployment benefits, according to a spokeswoman for the State Department of Labor.

Once you successfully file, the amount you receive will depend on your state. But under the pandemic program, there will be a minimum benefit equal to one-half the state’s average weekly unemployment insurance amount. That comes out to about $190 a week nationally, on average, according to the National Employment Law Project.

How long your benefits last also varies by state. Most states offer 26 weeks, but others offer less. Under the second economic relief bill, most traditional workers are generally eligible for an added 13 weeks after their state-level benefit runs out. Self-employed people drawing benefits from the pandemic program may receive up to 39 weeks total, in an effort to mirror what traditional employees receive, according to a senior official at the Labor Department. If a state enters a period of high unemployment, triggering what are known as extended benefits, self-employed people may receive up to seven additional weeks.

Eligible workers may receive retroactive benefits for weeks of employment dating back to Jan. 27. The program runs until Dec. 31 unless it’s extended.

Certain gig workers — Lyft or Uber drivers, for example — should qualify for regular unemployment benefits in some places because of the broad definitions of employment under state laws, according to the National Employment Law Project. But it’s often difficult for these gig workers to claim regular benefits, often taking many months. That could potentially create a bottleneck in the application process, or shut out certain workers altogether. (Remember, to become eligible for pandemic benefits, workers must first be ineligible for regular unemployment.) In states that have passed formal exemptions for drivers or similar workers, however, the pandemic fund is supposed to serve as a backstop.

Undocumented workers will not qualify for unemployment benefits; individuals must be authorized to work to be eligible for the pandemic program, according to the National Employment Law Project.

Read the full story at What Self-Employed Workers Need to Know About the Coronavirus Stimulus Package – The New York Times

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