The best and worst part of being self-employed is that it’s all on you. You get to make every decision regarding your career and job. In “normal” times that can come with many perks, but during the pandemic and the time that lies ahead, doing everything alone can feel daunting. If your business is struggling, you might be asking yourself “Can I get unemployment if I am self-employed?”.
We’ll walk you through some options of what you can do when faced with unemployment as a self-employed individual so you don’t have to travel down this long road alone. It all starts with understanding that you can get unemployment if you’re self-employed or a sole proprietorship.
COVID-19 impact on small businesses and self-employed individuals
COVID-19 sent shockwaves through the economy, and they rippled through the lives of all small business owners. If you are self-employed, an independent contractor, a freelancer, a sole proprietor, or a gig worker, then you are likely still feeling the effects of the pandemic. It has been hard on workers, families, and women alike.
The financial hardship of the pandemic is likely to continue even as vaccination rates rise and we start returning to normal. But the good news is that there is help for self-employed workers who would not have previously qualified for unemployment benefits.
What does it mean to be self-employed?
There are many ways the IRS defines “self-employed,” but in general, we can define a self-employed person as someone who is employed by and paid by themselves. This could include:
- Someone who performs a trade as an independent contractor or a sole proprietor
- Individuals in a partnership that offers a trade service
- People who are in business with themselves even if it’s part-time
Who qualifies as self-employed?
In most cases, people who are self-employed fit into one of the following categories. So, check this list to see if any of these circumstances apply to your current work situation!
- If you’re in a sole-proprietorship, you are the only person in your company.
- A partnership means that partners mutually own a business.
- If you’re part of an LLC, then you’re self-employed. LLCs provide liability protection. So, a one-owner LLC is similar to a sole-proprietorship with liability protection. An LLC with several owners runs its business like a partnership but with the addition of liability protection.
- In some instances, S corp owners can be considered self-employed, but they are not considered to be self-employed in the same way other self-employed people are. S corporations involve owners like a partnership, but with S corps, the owners receive a salary like a typical employed person.
Self-employed unemployment programs and financial assistance
So, you think you qualify for unemployment as a self-employed worker, but what’s the best approach to receiving unemployment? Ever since the pandemic began, there have been dramatic changes in the world of unemployment benefits.
Paycheck Protection Program (PPP)
Considered a Small Business Administration (SBA) program, the Paycheck Protection Program (PPP) grants loans that are forgivable to those affected by the pandemic. SBA lenders grant loans to self-employed workers, independent contractors, freelancers, sole proprietors, or gig workers.
The intent of the PPP is to keep Americans who work for small businesses employed. These loans are a way of giving money to small businesses, and small business owners can then use the money to keep up with their payroll and ensure that their employees continue to receive their paychecks.
Any small business under 500 employees qualifies for a PPP loan. This program is still ongoing, meaning you can still apply for a PPP loan today. The deadline to apply for the PPP is May 31, 2021.
American Rescue Plan Act of 2021
The American Rescue Plan Act of 2021 is most famous for granting a third stimulus check to Americans, but it also included certain unemployment benefits as well. The bill extended the pre-existing Pandemic Unemployment Assistance (PUA) program which is the legislation that granted unemployment benefits to self-employed, gig workers, and freelancers.
So, when you apply for unemployment payments, they are increased by $300 per week. The American Rescue Plan Act of 2021 will continue to be in effect through September 6, 2021. You can file for unemployment through your state’s unemployment office.
Economic Injury Disaster Loan (EIDL)
The EIDL is for businesses that have experienced financial loss due to COVID-19. The loan grants business owners up to $150,000, but you can only borrow the value of your financial injury. Business owners can use the money to pay debts, payroll, and other business-related expenses. However, money from EIDL does not cover sales losses or expansion expenses.
The EIDL is worth looking into because the fine print—called the Supplemental Targeted Advances Assistance within the EIDL—grants a supplemental $5,000 that doesn’t need to be paid back. You can apply for the Economic Injury Disaster Loan directly on EIDL’s website. Keep in mind that the deadline is December 31, 2021.
Small Business Debt Relief Program (SBA)
The Small Business Debt Relief Program gives existing borrowers of SBA loans six months of relief on SBA loans. This includes the principal loan value as well as interest rates and fees accrued over time.
You are qualified for the relief program if you are a new borrower who took out loans before or on September 27, 2020. Debt relief for SBA borrowers should be automatic, but check with your lender for confirmation.
Self-Employment Assistance Program (SEAP)
SEAP helps new business owners that were affected by COVID-19. If the pandemic ruined your new business plans, SEAP is for you.
SEAP offers weekly payments in a similar manner to regular unemployment benefits. The difference between unemployment payments and SEAP payments is that you don’t have to be actively searching for jobs to qualify for SEAP, but you do have to be actively building your business.
The Self-Employment Assistance Program (SEAP) is only available in certain states. Check your state’s unemployment website for more information.
Tax credits
Although tax credits are not a direct payment option, saving money is one of the most effective ways to increase the amount of money you have in the bank. Here are some tax credits and deductions to look into if you are self-employed:
- Self-employment tax deductions
- Home office
- Internet and phone
- Health insurance
- Meals
- Travel
- Vehicle use
- Interest
- Publications and subscriptions
- Education
- Business insurance
- Rent
- Startup costs
- Advertising
- Retirement plan contributions
Get credit ready with MoneyLion
We’ve all been through a lot in the past year, and we should all be excited about our upcoming post-pandemic life. Business owners are the experts of pivoting, and we must use all of our resources to make our futures brighter. The goal is to come out of hardship better than before.
If you’re worried about your financial future or you haven’t received financial assistance yet, MoneyLion can help. We offer Credit Builder Membership loans. This is a credit-building solution for self-employed people and small businesses impacted by the pandemic.
