Questions and Answers About Unemployment Benefits for Family Child Care Providers
Are family child care providers eligible to claim unemployment benefits because of the COVID-19 virus?
In my last article on unemployment I indicated that providers who voluntarily closed down or stayed open and lost income because of the virus were not eligible to receive unemployment benefits.
This was incorrect. Family child care providers are eligible under this new law. I received new information after writing my article. Providers who close or have lost income are eligible to receive unemployment benefits. I apologize for confusing you.
The CARES Act was signed into law on Friday, March 22, 2020. This law expanded the number of people who are now eligible to claim unemployment benefits and increased by $600 a week how much eligible people can claim.
Family child care providers are eligible to receive unemployment benefits when any of the following occur:
- Your state government requires you to shut down your program
- You are closed as a direct result of the COVIDd of the COVID-19 public health emergency and such school or facility care is required for the individual to work”
- You have been advised by a health care provider to self-quarantine due to concerns related to the virus
If you believe you might be eligible for unemployment benefits, contact your state unemployment office. Here’s a link to find your state unemployment office.
This new unemployment law for the self-employed is called pandemic employment assistance. These benefits begin if you were unemployed or partly unemployed after January 27th and benefits continue until December 31st as long as you are eligible.
How much will I receive in unemployment benefits?
Each state sets its own rules about how much you can receive in unemployment benefits. They can range widely. State benefits for self-employed people can’t be less than 50% of your state’s average weekly benefit but can be higher. The new federal law will add $600 a week to whatever you receive in state benefits. After that you may continue to receive the eligible state benefit.
The determination of how much you might get in state unemployment benefits can be complicated and will vary from state to state. Once you do qualify for state unemployment benefits you will then always get the $600 per week extra under the federal law. Don’t worry now about how much your benefit might be right now. Instead, go ahead and apply.
Here's a link where you can find your state’s minimum and maximum weekly unemployment benefits: https://oui.doleta.gov/unemploy/content/sigpros/2020-2029/January2020.pdf
Problems filing for unemployment
Many providers are having problems trying to apply for unemployment benefits online! Often,state forms don’t seem to allow providers to file as someone who is self-employed. This is a common problem across the country. Some states have not updated their online application process. It may take some time for them to fix this. You can try calling your unemployment office or contact your state representative for help, but it's probably better if you wait a little longer. You can try to apply during different times of the day or night. You won’t lose benefits if you can’t get through now. Your benefit will be retroactive to when you closed or lost income.
Here are some questions and answers about this new unemployment law:
Question: What type of documentation will I need to show when I apply?
Answer: Your 2019 (if you filed it), or your 2018 tax return. Your state may ask for more documentation.
Question: Four of my families have left me and I’m caring for one family who is an essential worker. I can’t make it on this reduced income. Can I shut down and claim unemployment benefits?
Answer: Yes. A drop in income because of the virus does make you eligible for unemployment benefits.
Question: All of my parents keeping their children at home but are still paying me. Am I entitled to claim unemployment benefits?
Answer: No, because you have not experienced any loss of income because of the virus.
Question: I’ve only lost one of five families. I’m still open. Can I claim unemployment benefits?
Answer: It’s not clear. The law is intended to help businesses who are hurt by the coronavirus. A loss of 20% of your business may or may not qualify. Go ahead and apply for unemployment benefits to find out if you do qualify.
Question: My husband has asthma and high blood pressure. I’m afraid that caring for children will put him at risk. If I close, will I be able to apply for unemployment benefits?
Answer: Yes.
Question: Are my unemployment benefits taxable income?
Answer: Yes.
Question: If I continue to receive income from some of my parents who are paying me half my normal rate, will that reduce my unemployment benefits?
Answer: Yes, but that doesn’t mean you shouldn’t apply for unemployment benefits. As long as you are eligible for state unemployment benefits you will still receive the $600 federal benefit.
Question: I had to lay off my helper because of reduced enrollment. I’ve been issuing a Form 1099 to her each year. Is she entitled to claim unemployment benefits?
Answer: Yes. However, you will likely face penalties for misclassifying your worker. People who help you care for children should be treated as employees unless they are in the business of providing substitute care for other family child care providers. That means that you should have withheld Social Security/Medicare taxes and paid state and federal unemployment taxes. When your helper files for unemployment she will list you as her employer and you will be forced to pay penalties for not having paid into the unemployment fund. The amount of the penalty will depend on how long she has worked for you.
Question: I’ve heard from providers who are set up as an S Corporation that they are able to claim unemployment benefits because they are treated as an employee by the corporation. Does this mean I should incorporate as an S Corporation to ensure that I’ll be eligible for unemployment benefits in the future?
Answer: The decision on whether or not to incorporate is a complicated one. Unless you understand the legal and tax consequences, it is not a good idea to do so. Consult a lawyer and tax preparer before making this decision. Also, currently during the COVID-19 crisis, you can qualify for unemployment benefits even though you are self-employed.
Question: I want to apply for the new Small Business Administration (SBA) Paycheck Protection Program. If apply for unemployment benefits, will this affect my ability to get this loan?
Answer: This is a difficult question to answer as of now. You should consult with your tax preparer about this. I will be writing about the Paycheck Protection Program soon.
Question: I’m an undocumented family child care provider. Am I eligible for unemployment benefits?
Answer: Only if you are an ITIN tax filer and have work authorization. Paying state and federal income taxes does not by itself qualify you for unemployment benefits.
Question: I had to lay off my employee and reduce the hours of another employee. Are they entitled to unemployment benefits?
Answer: Your laid off employee is probably entitled to unemployment benefits. Reducing the hours of an employee may or may not make them eligible. It depends on your state laws. Have the employee contact your state unemployment office.
The CARES ACT
Here’s the specific language of the CARES ACT that makes family child care providers eligible for unemployment benefits:
Title II – Assistance for American Workers, Families, and Business, Section 2102 Pandemic Unemployment Assistance
“(ii) provides self-certification that the individual— (I) is otherwise able to work and available for work within the meaning of applicable State law, except the individual is unemployed, partially unemployed, or unable or unavailable to work because—
(aa) the individual has been diagnosed with COVID–19 or is experiencing symptoms of COVID–19 and seeking a medical diagnosis; (bb) a member of the individual’s household has been diagnosed with COVID–19;
(cc) the individual is providing care for a family member or a member of the individ-ual’s household who has been diagnosed with COVID–19;
(dd) a child or other person in the household for which the individual has primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of the COVID–19 public health emergency and such school or facility care is required for the individual to work;
(ee) the individual is unable to reach the place of employment because of a quarantine imposed as a direct result of the COVID–19 public health emergency;
(ff) the individual is unable to reach the place of employment because the individual has been advised by a health care provider to self-quarantine due to concerns related to COVID–19;
(gg) the individual was scheduled to commence employment and does not have a job or is unable to reach the job as a direct result of the COVID–19 public health emergency;
(hh) the individual has become the bread- winner or major support for a household because the head of the household has died as a direct result of COVID–19;
(ii) the individual has to quit his or her job as a direct result of COVID–19;
(jj) the individual’s place of employment is closed as a direct result of the COVID– 19 public health emergency; or
(kk) the individual meets any additional criteria established by the Secretary for unemployment assistance under this section; or
(II) is self-employed, is seeking part-time employment, does not have sufficient work history, or otherwise would not qualify for regular unemployment or extended benefits under State or Federal law or pandemic emergency unemployment compensation under section 2107 and meets the requirements of subclause (I);
So, according to the last paragraph, self-employed providers are eligible for unemployment benefits.
As I get more information I will continue to write about this topic.
Tom Copeland – www.tomcopelandblog.com
Image credit: https://thebluediamondgallery.com/highway-signs/u/unemployment.html
