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What's happening to federal unemployment benefits after summer? Here's what we know

Millions of Americans have already lost unemployment benefits, and more are getting cut off in September. Will pandemic programs for laid-off workers be reinstated?

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Enhanced federal jobless benefits are set to expire in many states on Labor Day. 

Sarah Tew/CNET

Enhanced jobless benefits, which include $300 weekly bonus checks as well as assistance for freelancers and the long-term unemployed, are inching closer to their expiration date of Sept. 6. Some two dozen states had already chosen to pull the plug early on pandemic-related coverage, with governors claiming the benefit was disincentivizing out-of-work residents from filling jobs. But recent reports indicate that the ending of benefits in those states had little impact on labor markets

In the meantime, some jobless residents are taking legal action to have that pandemic relief aid restored. Lawsuits have been successful in three states -- Indiana, Maryland and, most recently, Arkansas -- with similar cases pending in states like Florida, Texas and Tennessee. Unemployed workers argue they've been unable to pay for basic expenses, including rent, due to the early cancellation of the federal programs. 

While new jobless claims dropped last week, the economy hasn't yet returned to pre-pandemic "normalcy." The recent uptick in new delta-variant COVID-19 cases could signal a return to restrictions and, consequently, the slashing of more jobs. So what does that mean for those who've already been cut off from the expanded programs? And what happens to gig workers and those who haven't found work when the programs expire nationwide after summer? 

We'll continue to update this story. In the meantime, the IRS is issuing more refunds to those who were taxed on their 2020 unemployment benefits. Here's more information about the advance child tax credit payments that started going out July 15. 

Why did some states cut off unemployment aid early and which states are restoring it?

Citing labor shortages, 26 state governors said pandemic-related unemployment benefits were producing limited incentives for workers to take jobs. Many economists and analysts have disagreed, highlighting how several factors have prevented people from finding suitable work, including low wages, lack of child care and fear of contracting COVID-19. 

The premature cutoff of benefits affects over 4.7 million workers who've been relying on the $300 weekly supplement throughout the pandemic. Of those workers, 2.3 million will no longer receive any state or federal unemployment aid. 

Indiana, Maryland and Arkansas were slated to cut off benefits early, but rulings by judges forced those states to preserve the federal coverage. Lawsuits have also been filed against state governors in Florida, OklahomaTexas and Tennessee, noting that the ending of benefits makes it harder for the unemployed to afford basic needs. (No rulings have been issued in those states so far.)

This week, a state judge in Ohio denied an appeal to restore the pandemic aid to jobless residents while he considers the case.

When do bonus federal jobless benefits expire in each state? 

Here are the enhanced jobless benefits end dates for all states, including those that cut off aid this summer. If your state isn't listed below, those benefits are set to expire on Labor Day, Sept. 6. 

Early end dates for enhanced jobless benefits in 26 states

Expiration State
June 12 Alaska, Iowa, Mississippi, Missouri
June 19 Alabama, Idaho, Nebraska, New Hampshire, North Dakota, West Virginia, Wyoming
June 26 Florida, Georgia, Ohio, South Carolina, South Dakota, Texas, Utah
June 27 Montana, Oklahoma
July 3 Tennessee
July 10 Arizona
July 31 Louisiana
Sept. 6 Arkansas, Indiana, Maryland (all reinstated) and other states not listed above  

Some of those states, including Arizona, Montana, New Hampshire and Oklahoma, will offer financial incentives for individuals to find work. 

States that aren't 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 to prove they're 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.

What's the White House response to ending benefits early?

Labor Department officials have said 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, President Joe 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's happening to freelancers who get PUA benefits?

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."

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One in four jobless Americans have been unemployed for over a year. 

Sarah Tew/CNET

Will enhanced jobless benefits end permanently in September?

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 (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. 

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 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 disbursing unemployment tax refunds?

After some initial delays, the first batch of refunds -- over 2.8 million -- went out the first week of June. In July, the IRS issued two more batches: nearly 4 million additional refunds and another 1.5 million. Returns that are more complicated 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. Though the IRS has said taxpayers don't 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 about 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

What else is there to know about states ending 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 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. 

Is it still possible to apply for unemployment benefits?

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.