Does Unemployment Continue After Contract Work?
Unemployment creates an unfortunate and difficult situation for those who have to go through it. Finding temporary work while you are unemployed can be helpful in helping your meet your financial obligations while searching for full-time employment. Some people turn to contract work to help take off some of the stress of being unemployed. Luckily, contract work does not necessarily mean the end of unemployment benefits.
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Eligibility
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Eligibility for unemployment benefits vary from state to state, but must fall within guidelines established by the federal government, according to the U.S. Department of Labor. To be eligible, the former employee must have worked for an employer who paid in unemployment taxes to cover employees who lose their job through no fault of their own. An unemployed individual is generally considered eligible if he worked for such an employer and did not lose his job due to misconduct. The amount the individual qualifies for and the eligibility requirements can vary significantly.
Contract Work Definition
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The IRS defines an independent contractor as anyone who completes contract work where the employer only has an influence over the end result of the work. When an employer has no real say over how or when the work is completed, the worker can rightly be declared a self-employed contract worker. Because the employer is not required to pay unemployment taxes on this kind of worker, the independent contractor cannot apply for unemployment benefits if he is later out of work. The only exception may be in cases where the independent contractor accepts temporary work during a period of unemployment eligibility between one wage or salary-based job and the next.
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Benefit Reduction
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Any income collected during the period in which the unemployed individual is collecting unemployment benefits must be reported to the state's unemployment office. Unemployment benefits are primarily designed to offset income losses up to a certain percentage of what the unemployed individual would have earned had he not lost his job. The percentages vary by state. Any income received from contract work by the individual who applies for unemployment will reduce the unemployment benefit by the amount the contract worker makes.
Full-Time Contract Work
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In instances where contract work income is equal or greater than the unemployment benefit received by the unemployed individual, unemployment eligibility will generally end. However, in some states like Massachusetts, the contract work does not end the eligibility to receive unemployment benefits if the contract work ends prior the individual's unemployment eligibility period. In Massachusetts, unemployed workers can resume receiving unemployment benefits for up to one year after their initial eligibility begins. Therefore, if contract work ends, for example, nine months after the individual is initially unemployed, then the individual reopens the unemployment claim for up to three months.
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References
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