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Unemployment benefits: Why are states canceling $300 checks and pandemic assistance?

While states continue placing restrictions on extended jobless benefits, we'll tell you what you need to know about unemployment coverage, payment schedule, tax exemptions and more.

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The expanded unemployment benefit extends to September.

Sarah Tew/CNET

Many states across the US are preparing to end their participation in federal unemployment programs. Starting in June, those states -- including Alaska, Indiana and Texas -- will end the $300 weekly unemployment bonus and the extension of those benefits. (The American Rescue Plan provides that extra unemployment money for states until Labor Day.) 

Pandemic Unemployment Assistance is also ending in several states for the long-term unemployed and those who are self-employed, such as freelancers and gig workers. What does that mean for the unemployed who participate in federal unemployment programs and the $300 weekly bonus? We'll tell you everything you need to know, including how the IRS has started issuing refunds of up to $10.200 to those taxed on unemployment checks in 2020. 

In the meantime, catch up on the latest about child tax credit payments starting in July and stimulus "plus-up" payments. You can also check 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 recent information. 

States that are opting out of federal unemployment programs

So far, 21 states have canceled the bonus unemployment benefits provided through the American Rescue Plan. Citing labor shortages, state governors say that enhanced unemployment coverage discourages workers from taking jobs. Some economists and analysts disagree, noting that several factors are preventing people from finding suitable work, including lack of child care and fear of contracting coronavirus. 

A few days after Montana reported its withdrawal from pandemic-related unemployment programs on May 4, the US Chamber of Commerce called for an end to the $300 weekly federal bonus. Other states soon followed. Here are the states that have announced a halt to enhanced jobless benefits, which were already set to expire in September:

  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • Georgia
  • Idaho
  • Indiana
  • Iowa
  • Mississippi
  • Missouri
  • Montana
  • North Dakota
  • Ohio
  • Oklahoma
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • West Virginia
  • Wyoming

The official withdrawal varies state to state, with some ending their participation in July and others as early as June. The reduction of benefits is estimated to affect at least 2 million people

What's Biden's response on unemployment benefits?

In his remarks on the economy on May 10, President Joe Biden responded to states canceling unemployment benefits and reaffirmed the federal 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," Biden said. "That's the law."

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," according to a department FAQ. The New York Times reported that the Biden administration asked the Labor Department to work with states to make sure unemployed workers cannot continue to draw benefits if they turn down a suitable job offer.

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Millions of Americans who are still without a job rely on unemployment benefits. 

Sarah Tew/CNET

If I start receiving unemployment benefits, will I get the extra $300 a week and for how long?

The recent most recent COVID relief package extends enhanced unemployment benefits until Labor Day, Sept. 6, with a $300 weekly federal bonus on top of what your state pays. The supplemental benefits were supposed to start in April, 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 -- unless your state is one of those that has opted out. 

While unemployment rates are lower than they were last year at the start of the pandemic, as of April some 16 million Americans (1 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. 

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. 

Is it possible the federal bonus payments extend beyond September? 

It's possible, of course. But much depends on what happens with the economic rebound over the summer and the discussion over unemployment programs. We expect the topic to come up in Congress as the Sept. 6 deadline approaches.

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What else do I need to know about 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, 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 (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. 

In most states, the extension of pandemic-related unemployment 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. Some states that are cutting off the enhanced benefits are also stopping aid to those collecting PUA. In other states, like Arizona, residents can still receive PUA but will lose the $300 weekly benefits. 

Am I eligible for the $10,200 unemployment refund? 

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. 

Do I qualify for 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, 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.

How do I find out if I qualify for 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.