Can people get unemployment if their wages were unreported?
March 28, 2020 10:26 PM Subscribe
What kind of help exists for people whose income was partially or entirely "under the table?"
I'm curious about what resources are available for people who made some or all of their income under the table -- yardwork, house cleaning, restaurant servers who reported some but not all of their tips, etc. Are they partially or entirely out of luck in the unemployment system, or are there accommodations made for people with a certain amount of untaxed income? I'm guessing that to some extent and to some people, the logic is "well, this is what happens when you don't report your income / you can't expect to not pay into the system but still receive benefits from it," and I'm not looking for a debate, but people in that circumstance do need to eat, so I am wondering to what extent they are locked out of funding and services, what practical advice I can pass along, and what to tell my Congress people. What resources DO exist, both from government sources and from those who are trying to address this gap in the safety net? Is that $600 addition to unemployment paid to all claims or only to people whose income was above the income limits?
I'm curious about what resources are available for people who made some or all of their income under the table -- yardwork, house cleaning, restaurant servers who reported some but not all of their tips, etc. Are they partially or entirely out of luck in the unemployment system, or are there accommodations made for people with a certain amount of untaxed income? I'm guessing that to some extent and to some people, the logic is "well, this is what happens when you don't report your income / you can't expect to not pay into the system but still receive benefits from it," and I'm not looking for a debate, but people in that circumstance do need to eat, so I am wondering to what extent they are locked out of funding and services, what practical advice I can pass along, and what to tell my Congress people. What resources DO exist, both from government sources and from those who are trying to address this gap in the safety net? Is that $600 addition to unemployment paid to all claims or only to people whose income was above the income limits?
I haven't surveyed every single state, but for every state I know of, there are basic minimum reported earnings (and the associated payments) requirements in the prior few quarters for UI. It's called "insurance" for a reason--you and your employer are literally paying into it for protection against risk of income loss. If you are not covered, you don't get to make a claim. Unemployment insurance is not intended to serve as a base level of income support for all society, so it's not properly called a "gap." The gap exists where we got rid of most cash welfare payments to the poor in the 90s.
I mean, yes, you can file a claim declaring whatever earnings, but the state will confirm wages as part of processing the claim, and it would be a rare person in that kind of situation who would be able to get confirmation. Even assuming the employer(s) could be identified--not always the case in this situation--the employer would have to admit that it had been evading payroll taxes and W2 reporting requirements, which...is probably not going to happen.
posted by praemunire at 10:49 PM on March 28, 2020 [5 favorites]
I mean, yes, you can file a claim declaring whatever earnings, but the state will confirm wages as part of processing the claim, and it would be a rare person in that kind of situation who would be able to get confirmation. Even assuming the employer(s) could be identified--not always the case in this situation--the employer would have to admit that it had been evading payroll taxes and W2 reporting requirements, which...is probably not going to happen.
posted by praemunire at 10:49 PM on March 28, 2020 [5 favorites]
The employee may also owe taxes if their employment and wages paid are verified, but won't be in "trouble" in any way other than that.
In the olden days, I would have said that the IRS has bigger fish to fry, but these days they literally spend more time going after the poor claiming the EITC than millionaires because it's a lot easier to hound people without lawyers. Tax fraud is a crime. I would not be confident that there would be no collateral consequences to formally affirming to this particular government that you deliberately and consciously did not report your earnings and pay your taxes.
posted by praemunire at 10:54 PM on March 28, 2020 [6 favorites]
In the olden days, I would have said that the IRS has bigger fish to fry, but these days they literally spend more time going after the poor claiming the EITC than millionaires because it's a lot easier to hound people without lawyers. Tax fraud is a crime. I would not be confident that there would be no collateral consequences to formally affirming to this particular government that you deliberately and consciously did not report your earnings and pay your taxes.
posted by praemunire at 10:54 PM on March 28, 2020 [6 favorites]
(Sorry, if you are also asking the more generic question of what a person can do in that situation, you should search AskMe, which has had a number of threads on this topic, including some recently, and also the Homeless Survival Guide on the wiki has, despite the name, some more general advice and links appropriate to someone without an income.)
posted by praemunire at 11:11 PM on March 28, 2020 [1 favorite]
posted by praemunire at 11:11 PM on March 28, 2020 [1 favorite]
Here is a CNBC article about the just-passed relief bill that should clarify some things.
But in general, yes, as praemunire says, the system is set up as a form of "insurance", you have to pay into it to get anything out, so people working for cash or even those working as "self-employed independent contractors" usually aren't eligible for much, if anything at all.
Note that part of the relief bill is not just the $600 but also allows those who might not ordinarily qualify to get 1/2 their state's average benefits on top of that.
Is that $600 addition to unemployment paid to all claims or only to people whose income was above the income limits?
I'm not sure what income limits you're referring to? Normally unemployment insurance requires the claimant to have some minimum history of work & income over the previous year to 18 months, pretty sure this varies by state. And if someone officially earns less than . . . I think it's $600 per year? they may not file taxes, which could cause problems with them getting money under the new relief bill.
Either one of the already-passed relief bills that expanded unemployment benefits or an early version of the new CARES bill (yes, it's hard to keep track of this torrent of information) had a low-end cutoff where people making under a certain amount still wouldn't qualify, but I'm 99% sure the current version of CARES that just passed doesn't have that, so as long as someone actually filed a tax return in 2018 or 2019 they should be able to receive unemployment benefits.
posted by soundguy99 at 3:20 AM on March 29, 2020
But in general, yes, as praemunire says, the system is set up as a form of "insurance", you have to pay into it to get anything out, so people working for cash or even those working as "self-employed independent contractors" usually aren't eligible for much, if anything at all.
Note that part of the relief bill is not just the $600 but also allows those who might not ordinarily qualify to get 1/2 their state's average benefits on top of that.
Is that $600 addition to unemployment paid to all claims or only to people whose income was above the income limits?
I'm not sure what income limits you're referring to? Normally unemployment insurance requires the claimant to have some minimum history of work & income over the previous year to 18 months, pretty sure this varies by state. And if someone officially earns less than . . . I think it's $600 per year? they may not file taxes, which could cause problems with them getting money under the new relief bill.
Either one of the already-passed relief bills that expanded unemployment benefits or an early version of the new CARES bill (yes, it's hard to keep track of this torrent of information) had a low-end cutoff where people making under a certain amount still wouldn't qualify, but I'm 99% sure the current version of CARES that just passed doesn't have that, so as long as someone actually filed a tax return in 2018 or 2019 they should be able to receive unemployment benefits.
posted by soundguy99 at 3:20 AM on March 29, 2020
My understanding from my mother (disabled doing some nannying work on the side that stoped) my brother (young able body adult doing construction for cash) neither are eligible due to non reporting of the income.
posted by AlexiaSky at 5:58 AM on March 29, 2020 [2 favorites]
posted by AlexiaSky at 5:58 AM on March 29, 2020 [2 favorites]
Is that $600 addition to unemployment paid to all claims or only to people whose income was above certain limits?
soundguy99 is right: The low-end cutoff that was part of early COVID-19 relief legislation is not part of the package that passed, and it would not, in any case, apply to applicants for unemployment. Vox has a good explainer on the $1,200 stimulus checks.
posted by virago at 7:13 AM on March 29, 2020 [1 favorite]
soundguy99 is right: The low-end cutoff that was part of early COVID-19 relief legislation is not part of the package that passed, and it would not, in any case, apply to applicants for unemployment. Vox has a good explainer on the $1,200 stimulus checks.
posted by virago at 7:13 AM on March 29, 2020 [1 favorite]
Might be useful to indicate your country and state above the fold.
posted by eviemath at 7:15 AM on March 29, 2020 [1 favorite]
posted by eviemath at 7:15 AM on March 29, 2020 [1 favorite]
To clarify my comment:
The low-end cutoff had been part of early versions of the stimulus payment legislation. The Senate GOP wanted a two-tiered system: $600 stimulus checks for people who don't earn enough to file an income tax return, $1,200 checks for people who earn up to $75,000.
The version of the bill that passed does not include this cutoff. But to receive the coronavirus stimulus checks (which are separate from the expanded unemployment benefits), people who don't earn enough to file a tax return will have to file a return this year.
posted by virago at 7:38 AM on March 29, 2020 [2 favorites]
The low-end cutoff had been part of early versions of the stimulus payment legislation. The Senate GOP wanted a two-tiered system: $600 stimulus checks for people who don't earn enough to file an income tax return, $1,200 checks for people who earn up to $75,000.
The version of the bill that passed does not include this cutoff. But to receive the coronavirus stimulus checks (which are separate from the expanded unemployment benefits), people who don't earn enough to file a tax return will have to file a return this year.
posted by virago at 7:38 AM on March 29, 2020 [2 favorites]
Response by poster: Thanks for all the answers. So to see if I understand everything and ask a follow-up question:
- The unemployment insurance system doesn't have any provisions for people who come forward with claims related to under-the-table income or under-reported tips. Wages get verified with employers, so if someone was working completely under the table, the employer would have to implicate themselves in a big way for the worker to be verified.
- Even self-employed people who had fully reported their income wouldn't normally be eligible for unemployment. But they are now eligible for about half of what they would get via the unemployment system if they'd earned that money via W2 wages (i.e., in California, wage earners get half of their salary up to certain limits, so someone making the same amount as an independent contractor would get one-quarter of their income).
- I'm hearing that people on unemployment get an extra $600/week. Is that a flat rate (everyone gets $600) or income dependent? By income dependent, here's what I mean. Unemployment in California previously topped out at $450/week for anyone earning $11,674.01 or more in a reference quarter. It seems to be paying basically half of someone's income up to that point, but then it maxes out. Obviously, a lot of people are making more than $48k/yr. I had originally thought that the extra $600/week was to boost that upper limit so that people making more could come closer to receiving half of their full income. But obviously, from a social-justice lens, it would be great if everyone on unemployment, even those receiving the lowest amount of benefits, received that $600 on top of what they are eligible for.
Thanks!
posted by slidell at 11:24 AM on March 29, 2020
- The unemployment insurance system doesn't have any provisions for people who come forward with claims related to under-the-table income or under-reported tips. Wages get verified with employers, so if someone was working completely under the table, the employer would have to implicate themselves in a big way for the worker to be verified.
- Even self-employed people who had fully reported their income wouldn't normally be eligible for unemployment. But they are now eligible for about half of what they would get via the unemployment system if they'd earned that money via W2 wages (i.e., in California, wage earners get half of their salary up to certain limits, so someone making the same amount as an independent contractor would get one-quarter of their income).
- I'm hearing that people on unemployment get an extra $600/week. Is that a flat rate (everyone gets $600) or income dependent? By income dependent, here's what I mean. Unemployment in California previously topped out at $450/week for anyone earning $11,674.01 or more in a reference quarter. It seems to be paying basically half of someone's income up to that point, but then it maxes out. Obviously, a lot of people are making more than $48k/yr. I had originally thought that the extra $600/week was to boost that upper limit so that people making more could come closer to receiving half of their full income. But obviously, from a social-justice lens, it would be great if everyone on unemployment, even those receiving the lowest amount of benefits, received that $600 on top of what they are eligible for.
Thanks!
posted by slidell at 11:24 AM on March 29, 2020
Response by poster: The country is the US and state is California -- sorry for the omission.
posted by slidell at 11:24 AM on March 29, 2020
posted by slidell at 11:24 AM on March 29, 2020
(Source, btw, is that I've been on unemployment relatively recently, have just filed for unemployment now thanks to C-19, work at a very small company so I have some limited general interaction with the unemployment process from the company side, in an industry that uses lots of independent contractors. (And sometimes pays folks in cash.))
The unemployment insurance system doesn't have any provisions for people who come forward with claims related to under-the-table income or under-reported tips
Yup.
Wages get verified with employers
Employment does for sure, once an individual files a claim I know the company has to fill out some paperwork & send it in to the state verifying the dates of employment, general hours per week worked, stuff like that. I am not sure if they also report an employee's wages on there. (This is also where the company can attempt to deny the ex-employee's claim, like say they were fired for poor performance or something that generally does not allow you to claim unemployment benefits.)
I believe (but am not 100% sure) that the state may also use W2's to help determine someone's wages to figure out the actual dollar amount of benefits an ex-employee is entitled to.
Mostly I'm pretty sure the state determines income from the employer's quarterly filings & tax payments into the insurance fund.
Here, for example - pdf link to the Ohio Employer's Guide to UI, it says:
Yyyuuup. (So obviously that ain't gonna happen.)
Even self-employed people who had fully reported their income wouldn't normally be eligible for unemployment.
Yup. Again, it's set up as an "insurance" situation - companies pay specific taxes that go into a general fund, that fund is used to pay benefits to unemployed people. Self-employed people don't pay into this fund, usually.
But they are now eligible for about half of what they would get via the unemployment system
My understanding is that they are now eligible to receive half the state's "average" benefit. How that works out in practice I think is unknown at this point. (Partly/largely because each state has a lot of leeway in determining exactly how it figures eligibility and distributes benefits.)
I'm hearing that people on unemployment get an extra $600/week. Is that a flat rate (everyone gets $600)
AFAICT it's a flat rate.
By income dependent, here's what I mean. Unemployment in California previously topped out at $450/week for anyone earning $11,674.01 or more in a reference quarter. It seems to be paying basically half of someone's income up to that point, but then it maxes out.
Right, see, this is where we get into the part where each state administers unemployment their own way under some rather general Federal rules & guidelines. Here is the (pre coronavirus) Ohio guide to unemployment for workers, where (if you can stand to read the thing) there's a whole complicated scenario where the state's Department of Jobs and Family Services says you have to have a minimum of 20 weeks of covered employment with a weekly pre-tax average wage of $269 for a certain "base" period that is not necessarily your most recent period of employment. There is a maximum benefit amount paid out, which depends on whether you have dependents or not, for a maximum length of time and/or dollar amount.
And then there's the part where now some states have taken it upon themselves to expand their unemployment benefits in various ways regardless of what the Federal government has suggested. Just as one example, Ohio has decided to waive a "you have to look for work every week" requirement that was previously part of the process.
I guess a TL:DR is that if you're interested in answers from a social justice/equality standpoint it's hard to get too detailed because each state runs things differently, if you're specifically interested in California because you or someone you know are hoping to claim unemployment, probably best for you to check the website of whichever California state agency handles unemployment benefits.
posted by soundguy99 at 3:20 PM on March 29, 2020 [2 favorites]
The unemployment insurance system doesn't have any provisions for people who come forward with claims related to under-the-table income or under-reported tips
Yup.
Wages get verified with employers
Employment does for sure, once an individual files a claim I know the company has to fill out some paperwork & send it in to the state verifying the dates of employment, general hours per week worked, stuff like that. I am not sure if they also report an employee's wages on there. (This is also where the company can attempt to deny the ex-employee's claim, like say they were fired for poor performance or something that generally does not allow you to claim unemployment benefits.)
I believe (but am not 100% sure) that the state may also use W2's to help determine someone's wages to figure out the actual dollar amount of benefits an ex-employee is entitled to.
Mostly I'm pretty sure the state determines income from the employer's quarterly filings & tax payments into the insurance fund.
Here, for example - pdf link to the Ohio Employer's Guide to UI, it says:
"The Ohio Unemployment Compensation Trust Fund is funded from payroll taxes paid by Ohio employers and is used to pay benefits to unemployed workers. Administrative funds for ODJFS are allocated by the federal government from federal payroll taxes that employers pay to the Internal Revenue Service.so if someone was working completely under the table, the employer would have to implicate themselves in a big way for the worker to be verified.
ODJFS collects wage data for all employees on a quarterly basis for the primary purpose of determining claimants’ eligibility for unemployment insurance benefits when an application for benefits is filed."
Yyyuuup. (So obviously that ain't gonna happen.)
Even self-employed people who had fully reported their income wouldn't normally be eligible for unemployment.
Yup. Again, it's set up as an "insurance" situation - companies pay specific taxes that go into a general fund, that fund is used to pay benefits to unemployed people. Self-employed people don't pay into this fund, usually.
But they are now eligible for about half of what they would get via the unemployment system
My understanding is that they are now eligible to receive half the state's "average" benefit. How that works out in practice I think is unknown at this point. (Partly/largely because each state has a lot of leeway in determining exactly how it figures eligibility and distributes benefits.)
I'm hearing that people on unemployment get an extra $600/week. Is that a flat rate (everyone gets $600)
AFAICT it's a flat rate.
By income dependent, here's what I mean. Unemployment in California previously topped out at $450/week for anyone earning $11,674.01 or more in a reference quarter. It seems to be paying basically half of someone's income up to that point, but then it maxes out.
Right, see, this is where we get into the part where each state administers unemployment their own way under some rather general Federal rules & guidelines. Here is the (pre coronavirus) Ohio guide to unemployment for workers, where (if you can stand to read the thing) there's a whole complicated scenario where the state's Department of Jobs and Family Services says you have to have a minimum of 20 weeks of covered employment with a weekly pre-tax average wage of $269 for a certain "base" period that is not necessarily your most recent period of employment. There is a maximum benefit amount paid out, which depends on whether you have dependents or not, for a maximum length of time and/or dollar amount.
And then there's the part where now some states have taken it upon themselves to expand their unemployment benefits in various ways regardless of what the Federal government has suggested. Just as one example, Ohio has decided to waive a "you have to look for work every week" requirement that was previously part of the process.
I guess a TL:DR is that if you're interested in answers from a social justice/equality standpoint it's hard to get too detailed because each state runs things differently, if you're specifically interested in California because you or someone you know are hoping to claim unemployment, probably best for you to check the website of whichever California state agency handles unemployment benefits.
posted by soundguy99 at 3:20 PM on March 29, 2020 [2 favorites]
Is that a flat rate (everyone gets $600
Yes, according to this CNBC article:
Yes, according to this CNBC article:
Under the new stimulus package, unemployed workers will receive an extra $600 a week on top of what they would be normally paid for up to four months until July 31. Once that additional federal assistance is exhausted, they will continue to receive their normal benefit amount, administered by the state.posted by virago at 5:17 PM on March 29, 2020
So in other words, the base unemployment benefit.is up to the state of California (in your example), but everyone who lost their job and wages because of COVID-19 will get the extra $600 from the feds.
posted by virago at 5:24 PM on March 29, 2020 [1 favorite]
posted by virago at 5:24 PM on March 29, 2020 [1 favorite]
Response by poster: Thanks all. This has been helpful. I appreciate it.
posted by slidell at 11:47 PM on March 29, 2020
posted by slidell at 11:47 PM on March 29, 2020
This just popped up - Vox.com explainer on the $600 plan & benefits expansion, that also contains info about the history and normal workings of UI.
posted by soundguy99 at 3:45 AM on March 30, 2020
posted by soundguy99 at 3:45 AM on March 30, 2020
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posted by augustimagination at 10:42 PM on March 28, 2020