What are the implications of being on unemployment and Patreon?
July 27, 2016 4:37 AM Subscribe
A while ago I quit my job and went on unemployment insurance. Then later, I signed up for Patreon because I figured it might help to make a little extra cash. But then I found out that apparently Patreon money is considered taxable income and you have to complete a W9 if you make more than $600/year. So... am I in some kind of "employment limbo?"
I know I should eventually ask an EDD representative about this, but I want to be prepared and know what exactly I should be asking. I keep imagining in my head that I'll call them and have trouble explaining what my situation even is, especially if I end up talking to someone who has never heard of Patreon (not sure how well-known Patreon is). Basically I want to avoid any horrible complications down the line.
I haven't made $600 yet, but it's possible that it might add up to that by the end of the year. Right now I'm making about ~$90/month (starting this month), with the possibility of going up or down over time. Does this mean I should be telling EDD I'm now receiving "wages?" Am I now considered "self-employed?" Should I just cancel my Patreon altogether to avoid hassles? I'd prefer to avoid the last action, if possible.
If it helps to know, I'm in California.
I know I should eventually ask an EDD representative about this, but I want to be prepared and know what exactly I should be asking. I keep imagining in my head that I'll call them and have trouble explaining what my situation even is, especially if I end up talking to someone who has never heard of Patreon (not sure how well-known Patreon is). Basically I want to avoid any horrible complications down the line.
I haven't made $600 yet, but it's possible that it might add up to that by the end of the year. Right now I'm making about ~$90/month (starting this month), with the possibility of going up or down over time. Does this mean I should be telling EDD I'm now receiving "wages?" Am I now considered "self-employed?" Should I just cancel my Patreon altogether to avoid hassles? I'd prefer to avoid the last action, if possible.
If it helps to know, I'm in California.
You are not self-employed. Are you continuing to look for work and ready to accept full-time work? You can claim earnings from Patreon on your weekly claim but if you are very concerned about the issue, you should be pro-active and discuss this with someone at the unemployment department. And you should set aside 30% of your side income for taxes as you earn it. You will also pay taxes on your unemployment income if you did not elect to have it withheld from each check.
posted by amanda at 6:34 AM on July 27, 2016 [1 favorite]
posted by amanda at 6:34 AM on July 27, 2016 [1 favorite]
Totally varies by state but when I was in Vermont and making some money on the side when I was looking for work it went exactly like COD describes. I didn't even get into where the money came from just "I made $90 working this week" when I filled out my stuff but also indicated that i was available for full time work. The $600 limit is for you when you pay your taxes. You'll need to report that money (so keep track of it) and pay taxes on it (I assume 25% as a rule of thumb which includes your own social security payments and etc) so don't have that be an unpleasant surprise in April.
posted by jessamyn at 6:40 AM on July 27, 2016 [1 favorite]
posted by jessamyn at 6:40 AM on July 27, 2016 [1 favorite]
Going off this document from the EDD it sounds like you need to report the income and your unemployment payment will be reduced by whatever you made that week minus $25 *or* 75% of whatever you made in that week.
I think the main thing you'll want to ask your EDD person is, if you're getting payment once a month, you can consider those to be the equivalent of four weekly payments, because you will come out further ahead with four weeks of $25 payments than you will for three weeks of $0 payments and one week with a $100 payment.
posted by mskyle at 7:32 AM on July 27, 2016 [1 favorite]
I think the main thing you'll want to ask your EDD person is, if you're getting payment once a month, you can consider those to be the equivalent of four weekly payments, because you will come out further ahead with four weeks of $25 payments than you will for three weeks of $0 payments and one week with a $100 payment.
posted by mskyle at 7:32 AM on July 27, 2016 [1 favorite]
This actually isn't a very vague area - California is quite clear about your obligations - see section C defining wages.
Effectively, any week that you earn $25.99 or less (from any source, including W9 income like Patreon), you are allowed to keep all of it without affecting your unemployment. There is a scale of how much you keep from $25.99/week up to $600/week. Past $600/week, you are effectively employed. Past $600/week, you will not be paid any unemployment benefits and should not claim that week on your unemployment insurance since you will not actually be paid anything by the state.
Yes, you have to report all income to both the state and the government both for the purposes of income taxes and unemployment insurance. The $600/year trigger for issuing a W9 is not relevent to either your income taxes or unemployment - you have to declare all income on your income taxes (whether or not a W9 is issued) and you have to report all income to your state's unemployment office (whether or not it is W9-based, W4-based, or W2-based).
The question you should be asking is how much your Patreon income is worth to you, since during your unemployment period you will be doing the same amount of work to get that Patreon income, but effectively getting less money from it (depending on how much money you make). If you make, for instance, $50/week on Patreon and are eligible for $450/week of benefits, then you will have to deduct $23.01/week from your claim ($50 - $26.99 "free"), which means you will make $50/week from Patreon, but you would have still made $23.01/week even without Patreon. So, you'd be doing the same amount of work, but before unemployment, it made you (about) twice as much money.
posted by saeculorum at 7:33 AM on July 27, 2016 [2 favorites]
Effectively, any week that you earn $25.99 or less (from any source, including W9 income like Patreon), you are allowed to keep all of it without affecting your unemployment. There is a scale of how much you keep from $25.99/week up to $600/week. Past $600/week, you are effectively employed. Past $600/week, you will not be paid any unemployment benefits and should not claim that week on your unemployment insurance since you will not actually be paid anything by the state.
Yes, you have to report all income to both the state and the government both for the purposes of income taxes and unemployment insurance. The $600/year trigger for issuing a W9 is not relevent to either your income taxes or unemployment - you have to declare all income on your income taxes (whether or not a W9 is issued) and you have to report all income to your state's unemployment office (whether or not it is W9-based, W4-based, or W2-based).
The question you should be asking is how much your Patreon income is worth to you, since during your unemployment period you will be doing the same amount of work to get that Patreon income, but effectively getting less money from it (depending on how much money you make). If you make, for instance, $50/week on Patreon and are eligible for $450/week of benefits, then you will have to deduct $23.01/week from your claim ($50 - $26.99 "free"), which means you will make $50/week from Patreon, but you would have still made $23.01/week even without Patreon. So, you'd be doing the same amount of work, but before unemployment, it made you (about) twice as much money.
posted by saeculorum at 7:33 AM on July 27, 2016 [2 favorites]
I agree that the rules about this are pretty clear. The forms even have a little entry box for money you earned. Story time:
My ex- took a freelance job while she was on unemployment, earning her about $40. Because of that one job, the EDD flagged her claim (under the totally extralegal theory that she was supposed to be looking for work 40 hours a week and that any income proved that she was not). They refused to pay anything until we appealed and went to an administrative law judge to get their decision reversed. All-in-all that took 4 months. They paid all the previous claims, but it was not a pleasant experience.
So should you claim it? Yes of course. At this point, you kind of have to. But unless the EDD has changed in the last 4 years, I'd expect a fight.
posted by Llamadogdad at 9:49 AM on July 27, 2016 [1 favorite]
My ex- took a freelance job while she was on unemployment, earning her about $40. Because of that one job, the EDD flagged her claim (under the totally extralegal theory that she was supposed to be looking for work 40 hours a week and that any income proved that she was not). They refused to pay anything until we appealed and went to an administrative law judge to get their decision reversed. All-in-all that took 4 months. They paid all the previous claims, but it was not a pleasant experience.
So should you claim it? Yes of course. At this point, you kind of have to. But unless the EDD has changed in the last 4 years, I'd expect a fight.
posted by Llamadogdad at 9:49 AM on July 27, 2016 [1 favorite]
I had the same type of freelance income reporting experience Llamadogdad's ex had, but at least I only had to argue with NYS unemployment directly for three weeks or so before they reinstated payments and gave me "back pay", because they somehow thought that getting $35 on one day meant I was now fully employed forever.
So I'd try to call first, even if the rules seem clear. Because it should work as COD described, but sometimes it doesn't.
posted by mgar at 6:45 PM on July 27, 2016 [1 favorite]
So I'd try to call first, even if the rules seem clear. Because it should work as COD described, but sometimes it doesn't.
posted by mgar at 6:45 PM on July 27, 2016 [1 favorite]
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Don't know if it works the same in CA, but it could.
posted by COD at 5:50 AM on July 27, 2016