Business & Tech
CARES Act: 10 Things Self-Employed Workers Need To Know Now
Business owners, rideshare drivers and inde contractors find out what you don't know about COVID-19 federal programs
I'm a Chicago Uber driver who averaged $750 a week from March 1, 2019 – March 15, 2020.
I've stopped driving because two weeks ago week (March 23-29) I only made $70.28 in 15.31 hours and I don't want to risk getting myself or others sick.
I plan on filing for unemployment benefits through the Illinois Department of Employment Security (IDES) under the recently passed CARES Act / Pandemic Unemployment Assistance (PUA) program. And I am not alone.
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According to the U.S. Bureau of Labor Statistics, Illinois has a total workforce of 6.5 million people with about two million classified as self-employed, which includes business owners, independent contractors and gig workers.
Although the CARES Act was a historic piece of legislation that will help ease the financial strain caused by COVID-19, there's a heightened sense of confusion and uncertainty among “unemployed” self-employed workers on how these new federal programs housed within the CARES Act will work.
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So, below are 10 questions and answers that self-employed workers affected by COVID-19 need to know right now:
1. What is the CARES Act and what is the Pandemic Unemployment Assistance program?
The following information about the CARES ACT and PUA is taken from the site Congress.gov, which is the official website for U.S. federal legislative information.
"The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, is a stimulus bill signed into law by President Trump on March 27 that responds to the COVID-19 outbreak and its impact on the economy, public health, state and local governments, individuals, and businesses.
In addition, the bill:
- Funds various loans, grants, and other forms of assistance for businesses, industries, states, local governments, and hospitals
- Provides tax rebates of up to $1,200 per individual and an additional $500 per child
- Temporarily expands unemployment benefits
- Suspends payments and interest on federal student loans
Within the CARES Act, there is the Pandemic Unemployment Assistance (PUA) program that creates a temporary, federal unemployment insurance plan for individuals not otherwise eligible for state benefits – self-employed, independent contractors, gig workers."
Besides giving self-employed workers the opportunity to collect unemployment benefits, PUA provides all qualified self-employed workers an additional $600 a week that starts April 5 and ends July 31, 2020.
2. I’m self-employed, how do I apply for the PUA program?
Self-employed workers, which includes independent contractors and gig workers, can apply for the PUA program by going to the IDES site – link below.
https://www2.illinois.gov/ides/Pages/default.aspx
3. I went to the IDES site, but I can’t figure out how to apply?
The IDES site, like most state unemployment sites in the U.S., is overwhelmed with applicants. According to the Chicago Tribune nearly 500,000 people in Illinois, or about 1 in 12 workers have filed in the last three weeks (March 15 - April 4) compared with 17 million nationally.
On April 7, IDES updated its site to give self-employed workers additional guidance:
On PUA benefits: "This portion of the benefits expansion package has not yet been implemented. Further details about the program, how to apply, and eligibility requirements will be made as soon as they have been finalized at IDES.Illinois.gov."
On Self-Employed Applicants: “Under regular unemployment rules, the incomes of self-employed workers, freelancers, and independent contractors are not subject to unemployment taxes and so typically these individuals are not eligible for unemployment benefits.
The stimulus package creates a new, temporary program to help people who lose this type of work as a direct result of the current public health emergency. IDES will provide information about how to apply for this benefit as soon as it is finalized. Please do not apply at this time.
Thank you for waiting to apply until further details are available. This will allow our employees to address the large volume of claims for those individuals who are eligible under current benefit programs.”
4. When will IDES start accepting applications from self-employed workers?
Unable to find much information online, on Wednesday, April 1, I contacted Illinois State Senator Tony Munoz via Twitter and he said:
"It's estimated that the new program will be running in about a month, but benefits will be backdated to the date of loss of employment."
I asked for clarification on when self-employed workers would be able to apply on the IDES site, did he mean "in about a month" just to file?
"Yes, that's when the program should be available for those workers to apply. I know these are challenging times, but be assured that our state agencies are doing the best they can in the midst of this crisis."
According to a Tweet posted April 8 by Mark Maxwell, the Capitol Bureau Chief covering the Illinois statehouse for WCIA CBS 3 in Springfield, he tweeted "Today, @SenBillBrady warned it "could take months" before self-employed workers would be able to file.
However, there could be some good news on the horizon. According to an April 9 CNBC post, Google is helping the New York State Department of Labor speed up the unemployment application processby providing cloud technology solutions that could used by other states as well.
UPDATE - APRIL 13: Press Release From Illinois Governor Pritzker :
Pandemic Unemployment Assistance (PUA)
PUA provides 100% federally funded unemployment benefits for individuals who are unemployed for specified COVID-19-related reasons and are not covered through other avenues in the unemployment insurance program, including self-employed sole proprietors and independent contractors. IDES is contracting with Deloitte to implement and maintain a web-based solution for PUA as quickly as possible. IDES will have this program fully implemented by the week of May 11.
https://www2.illinois.gov/IISNews/21385-Unemployment_Insurance_and_COVID-19.pdf
UPDATE - CNBC Post April 17: "Based on the way the coronavirus relief law is written, many (if not all) states will require this expanded group of [self-employed] workers to file for traditional unemployment insurance — similar to how a jobless W-2 worker would — and get denied for benefits, said Stephen Wandner, a former actuary with the U.S. Department of Labor.
After that denial, workers would be eligible to file for benefits under the new PUA system.
“I think every state will require that,” Wandner said.
Robert Asaro-Angelo, the commissioner of the New Jersey Department of Labor and Workforce Development, alluded to that perhaps counterintuitive process.
“The first step is they have to be denied for unemployment first,” he told NJ.com. “The law clearly says this is for individuals who would otherwise have been ineligible.
“No matter what, the first step is doing to be to go through the denial process.”
UPDATE - April 17 Tweet From IL State Senator Celina Villanueva Regarding CNBC Post: "Yes, IDES shared earlier this week that independent contractors & SE workers are advised to apply for unemployment now bc those applicants have to be denied traditional unemployment to be eligible for the PUA program."
UPDATE - NewsChannel 9 WSYR Post April 20:
"Self -employed, independent contractors and others who are now eligible for unemployment benefits got some good news Monday.
The New York State Labor Department introduced what it called a new streamlined application process for those seeking Pandemic Unemployment Assistance.
The department has dropped the process that these workers fill out a standard application for unemployment benefits, and then be rejected, before they could apply for Pandemic Unemployment Assistance program.
...A spokesperson for the department says those who have already applied will not have to reapply under the new system.
State officials said the process was delayed because of federal requirements that those seeking benefits under this program were rejected under traditional unemployment.
But federal labor officials said states were told not to make applicants apply for traditional assistance first."
5. Why the delay? I need money ASAP!
There are two reasons – all state unemployment offices around the country are being crushed right now, and two, states cannot release PUA funds until they add procedural instructions from the United States Department of Labor (USDOL).
From the Georgia Department of Labor site:
“The USDOL directed states to wait for specific guidance on implementation procedures for this federal program before distributing funds on behalf of the federal government.”
The USDOL just published those guidelines on Sunday, April 5, so it will take some time for states to update its sites / computer systems.
If you want to get an idea of what to expect, Iowa and Minnesota (see link to 32-page guide below) seem to be adapting the fastest – both are ready for self-employed workers to apply now – links below.
https://www.iowaworkforcedevelopment.gov/pua-information
https://www.uimn.org/assets/application-step-by-step-instructions-selfemployed_tcm1068-425640.pdf
6. When IDES is ready for self-employed workers to file, how will my benefits be calculated?
According to the New York Times, “Benefit amounts (for self-employed workers) will be calculated based on previous income, using a formula from the Disaster Unemployment Assistance program, according to a congressional aide.”
https://www.nytimes.com/article/coronavirus-stimulus-package-questions-answers.html
7. I’m confused, what is the Disaster Unemployment Assistance program?
First created in 1970 and later amended in 1974, "DUA provides benefits only to those individuals who have become unemployed as a direct result of a declared major disaster and are not eligible for regular unemployment compensation."
The DUA program is not being used for the COVID-19 crisis, PUA within the CARES Act is covering benefits for those individuals who are not eligible for regular unemployment compensation.
However, it is expected that PUA will use a formula from the DUA program to calculate benefits for self-employed workers.
8. How does the DUA program calculate benefits for self-employed workers and what documents do I need?
The DUA uses tax returns if available:
“The base period to be utilized in computing the DUA weekly amount shall be the most recent tax year (2019) that has ended for the individual prior to the individual's unemployment that was a direct result of the major disaster.”
“The self-employment income to be treated as wages for purposes of computing the weekly amount…shall be the net income reported on the tax return.”
If you didn’t file your 2019 tax return yet, then you will need to provide documentation substantiating self-employment and wages earned.
Iowa and New York (two state unemployment agencies currently accepting self-employed applicants) are asking for 2019 1099 statements in the absence of 2019 tax returns.
And since all state unemployment offices are expected to follow the same guidelines, it’s a good idea to have your 1099 statements and other wage documents ready to upload on the IDES site.
9. How much can I get?
How much you will receive is still unclear, but Illinois W-2 workers receive 47 percent of their gross weekly earnings up to $484 – the maximum weekly amount anyone can receive – plus an additional $183 for each child under 18.
It’s also likely that if benefits are calculated using 1099 statements or some other proof of earnings besides 2019 tax returns, federal guidelines will not allow state unemployment offices to calculate benefit amounts using the full amount of the 1099 wages – you will probably need to deduct your expenses.
For example, if an Uber driver made $40,000 in 2019 1099 wages but had $8,800 in expenses, his benefit amount might be calculated using $31,200 or $600 a week. And in this case, 47 percent of $600 is $282. So, his total weekly benefit would be $882 – $282 plus the $600 a week from PUA.
10. Are there any other federal relief programs that self-employed workers might qualify for?
Yes, there are two, but both require some research:
1. Paycheck Protection Program –from the U.S. Treasury Fact Sheet: "PPP authorizes up to $349 billion in forgivable loans to small businesses including sole proprietorships, self-employed individuals, and independent contractors to pay their employees during the COVID-19 crisis."
You can apply online through any existing SBA lender, which includes most banks.
For more information on PPP, click on the link below to the U.S. Treasury PPP Fact Sheet.
https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf
2. Economic Injury Disaster Loan – from the SBA Web site: "EIDL allows eligible small business owners to apply for an Economic Injury Disaster Loan advance of up to $10,000. This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue.
Funds will be made available following a successful application. This loan advance will not have to be repaid."
For more information on EIDL, click on the link below to the SBA site.
UPDATE - Bloomberg Post April 16:
- SBA fund exhausted $349 billion stimulus in two weeks
- Money for disaster loans and emergency grants also exhausted
“These two loan programs [PPP & EIDL] are essential, and neither one is operational now,” said Holly Wade, director of research and policy analysis for the National Federation of Independent Business, the largest group representing small businesses in the country. “It’s absolutely terrible for the small business sector.”
Chris Maloney is Chicago Uber driver.
