September-15-10

Unemployment Benefits: Eligibility When Becoming Self-Employed

Question: I am currently collecting unemployment benefits but have started the process of establishing my own business. At what point will I no longer be eligible to receive unemployment benefits?

TGL Response: As a general matter, an unemployment claimant must be available “for other work” to be eligible for unemployment benefits. If a claimant plans to become self-employed and those plans make the claimant “unavailable to work” for another employer, the claimant is deemed to have withdrawn from the labor market and is therefore ineligible for unemployment benefits. If you remain available (and actively looking) for other work with other employers and you spend less than 50% of your working time in preparation for your self-employment venture, you are still eligible for unemployment. Under the DUA regulations, if you are eligible for unemployment compensation you will continue to receive benefits, or partial benefits, until that time that your “remuneration” exceeds your unemployment benefits. Remuneration is deemed to have been received at the same time as your obligation to pay taxes on that remuneration. That is, if you perform work in September for clients but remain eligible for unemployment benefits and do not receive payment for the work until November, you may be eligible until that cash comes in because that is when the taxable event typically occurs, at least in businesses utilizing the cash accounting method.