When you file an unemployment claim, you complete a questionnaire to determine your eligibility. One of the questions asked is whether you've been issued a 1099 form. If you did receive a 1099 form, you may be wondering, "Can a 1099 employee get unemployment benefits?" The truth is that a person who receives a 1099 form is not, technically, an employee, and thus is not eligible.
Independent contractors and self-employed professionals cannot receive unemployment benefits in the event of occupational hardship. Unless you have received a W-2 from your employer, you likely will not be able to successfully file an unemployment claim.
To qualify for unemployment, you must be classified as an employee. Employees receive W-2s each year from their employers to file taxes; because an employer takes taxes from an employee's paycheck, the W-2 form reports the amount of taxes taken from the employee's paycheck and paid to the IRS. Self-employed persons and independent contractors, on the other hand, are obligated to pay their own taxes. Therefore, they file their tax returns based on the Form 1099-MISC, which their clients issue instead of a W-2. Employees can receive unemployment compensation if they lose their jobs and meet earning and time requirements, but if your income is reported only on a 1099, you will not be eligible.
In light of the recent COVID-19 pandemic, many states have made temporary changes to unemployment eligibility and benefits to offset these increasingly difficult times. Check the U.S. Department of Labor website for resources to contact your state's unemployment insurance program for specific information.
What is a 1099 Form?
If you are an independent contractor or self-employed worker, you are responsible for paying certain taxes. Therefore, your clients must report your income. Any client who pays you $600 or more per year is required by the IRS provide you a Form 1099-MISC documenting your pay. This pay is known as "non-employee compensation" and is listed in Box 7 of the 1099. A typical 1099 form shows income only; while employees have payroll taxes taken from their paychecks and forwarded to the taxing authorities by their employers, contractors do not have this benefit.
You may not consider yourself an independent contractor, but if your "employer" issues you a 1099, that means you are considered a contractor and not an employee. The Internal Revenue Service offers you an opportunity to file Form SS-8 if you think your classification is inaccurate.
What is Unemployment Compensation?
Unemployment is a joint program administered by the state and federal government. Businesses with employees pay for unemployment insurance, and a few states even require employees to do so. The money is used to cover unemployment insurance claims. When you file a claim, you have to show that you were terminated through no fault of your own. If approved for the claim, you'll receive a specific amount of money for a certain number of months based on a percentage of your pay over a specific period of employment. Every state is different with respect to how long you can receive unemployment and the maximum benefit you can receive.
Employees vs. Independent Contractors
Employees are eligible for unemployment, but independent contractors are not. If you have one job that pays you as an employee and issues a W-2 form and another job that pays you as a contractor and issues a 1099 form, you will be eligible for unemployment from the first job, but not the second. In other words, if you receive both a W-2 and a 1099-MISC, you can still get unemployment benefits based on your W-2 pay.
Other Types of 1099 Forms
You may also receive other 1099 forms to document various sources of income. For example, 1099-INTs record any interest you receive from interest-bearing bank accounts, certificates of deposit or bond investments. A 1099-DIV certifies any dividend income earned from your stock investments. If you do get approved for unemployment benefits, you may also get a 1099-G detailing your unemployment pay. You can withhold federal and state taxes from your weekly benefit check, but if you don't, you may owe taxes on the unemployment compensation at the end of the tax year.
- Turbo Tax: What Is a 1099-G Tax Form?
- Turbo Tax: What Is the IRS Form 1099-MISC?
- CareerOneStop: What Is Unemployment Insurance?
- IRS: About Form 1099-MISC, Miscellaneous Income
- IRS: About Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding
- IRS: About Form 1099-DIV, Dividends and Distributions
- NerdWallet: What Is Form 1099-INT? How It Works and What to Do
- World Health Organization. "Rolling updates on coronavirus disease (COVID-19)." Accessed April 7, 2020.
- Congress.gov. "H.R. 748—CARES Act." Accessed April 7, 2020.
- United States Department of Labor. "UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 15-20." Accessed July 1, 2020.
- Whitehouse. "Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster Declarations Related to Coronavirus Disease 2019." Accessed Sep. 8, 2020.
Chris Brantley began writing professionally for a financial analysis firm in 1997. From 2000 to 2004, he worked as a financial advisor, specializing in retirement planning and earned his Series 7, Series 66 and insurance licenses. Brantley started his full-time writing career in 2012 and has written for a variety of financial websites, including insurance, real estate, loan and investment sites. He holds a Bachelor of Arts in English from the University of Georgia.