Maryland is the latest state to opt out of federal unemployment insurance.
Sarah Tew/CNETAt least 25 US states are now dropping out of the federal unemployment benefits program, with Maryland announcing it will stop sending the bonus weekly payment. As part of the American Rescue Plan of 2021, the federal government authorized an extra $300 a week in jobless aid and extended pandemic unemployment assistance for the self-employed, with an expiration date of Sept. 6. However, governors for 25 states said they will stop participation in these programs months early, leaving millions of jobless Americans in the lurch this summer.
The Department of Labor said the federal government won't intervene if individual states cancel those bonus payments. Given that the White House can't force state governors otherwise, many people -- such as the long-term unemployed and freelancers -- will end up losing aid entirely.
We'll tell you what you should know, including how the IRS has started refunding millions to those taxed on their 2020 unemployment payments. Here's more information about the advanced child tax credit payments starting in July and stimulus "plus-up" payments. You might also be interested if the government has back pay you need to claim. This story has been updated recently with new information.
List of states ending all or part of the enhanced federal unemployment benefits
With Maryland joining the list, 25 states planning to cancel the pandemic-related unemployment benefits. Citing labor shortages, state governors say this unemployment coverage discourages workers from taking jobs. Many economists and analysts disagree, noting that several factors are preventing people from finding suitable work -- including lack of child care and fear of contracting COVID-19.
A few days after Montana reported its withdrawal from pandemic-related unemployment programs on May 4, the US Chamber of Commerce called for an end to the $300 weekly federal bonus. Other states then followed.
Here are the states that have announced an early halt to enhanced jobless benefits, and the new end dates. (If your state is not listed here, benefits are set to expire on Labor Day.)
States ending participation in enhanced jobless benefits
| State | End date |
|---|---|
| Alaska | June 12 |
| Iowa | June 12 |
| Mississippi | June 12 |
| Missouri | June 12 |
| Alabama | June 19 |
| Idaho | June 19 |
| Nebraska | June 19 |
| New Hampshire | June 19 |
| North Dakota | June 19 |
| West Virginia | June 19 |
| Wyoming | June 19 |
| Arkansas | June 26 |
| Florida | June 26 |
| Georgia | June 26 |
| Ohio | June 26 |
| Oklahoma | June 26 |
| South Dakota | June 26 |
| Texas | June 26 |
| Utah | June 26 |
| Montana | June 27 |
| South Carolina | June 30 |
| Maryland | July 3 |
| Tennessee | July 3 |
| Arizona | July 10 |
| Indiana | July 19 |
Some of those states, including Arizona, Montana, New Hampshire and Oklahoma, will instead offer financial incentives for individuals to find work.
Other states that are not ceasing their participation in federal programs will reimpose stricter rules -- many of which were suspended during the pandemic -- for those collecting unemployment. Hawaii, for example, is requiring that jobless workers prove they are actively searching for work. Maryland is also requiring those receiving assistance to show they are looking for work.
What's happening with PUA benefits for the self-employed now?
The March extension of unemployment benefits also applied to Pandemic Unemployment Assistance: aid for workers who aren't normally eligible for unemployment insurance. It covers freelancers, gig workers, independent contractors and part-time workers.
Most of the states that are cutting off the enhanced benefits are also stopping PUA and terminating the Pandemic Emergency Unemployment Compensation program. Online groups calling to extend pandemic unemployment programs through the crisis offer more information.
In a May 13 letter to the Department of Labor, Sen. Bernie Sanders, an Independent from Vermont, appealed to the federal government to continue providing pandemic unemployment assistance to workers. Saying that jobless Americans will plunge into poverty in states slashing federal aid, he argued, "The PUA program has served as a backstop for our broken and outdated unemployment insurance (UI) system for over a year."
If you're self-employed, you may lose unemployment benefits entirely -- or not, depending on your state.
Sarah Tew/CNETHow did the White House respond to states cutting off unemployment?
In his remarks on the economy May 10, President Joe Biden responded to states canceling pandemic jobless benefits and reaffirmed the guidelines for receiving federal unemployment insurance. "We're going to make it clear that anyone collecting unemployment who is offered a suitable job must take the job or lose their unemployment benefits," Biden said. "That's the law."
According to the Department of Labor, if you turn down a suitable job, you can be denied unemployment benefits: "You must be able, ready and willing to accept a suitable job." The New York Times reported that the Biden administration asked the Labor Department to make sure unemployed workers can't continue to draw benefits if they turn down a suitable job offer.
Labor Department officials recently stated that their hands were tied and couldn't counter decisions by state governors to stop participation in the national unemployment programs.
What will happen with the $300 weekly bonus in unemployment benefits?
Unless your state is one of those that have opted out (see chart above), the enhanced unemployment benefits will continue until Labor Day, Sept. 6, granting a $300 weekly federal bonus on top of what the state pays. That extra money could allow unemployment recipients to receive a total of up to $7,500 for the 25 weeks spanning from March to September.
While unemployment rates are lower than they were at the start of the pandemic last year, as of this April some 16 million Americans (1 in 10 workers) were still receiving some kind of jobless aid. According to the Bureau of Labor Statistics, more than one in four jobless Americans have been without unemployment for over a year.
In 2020, as part of the CARES Act, those receiving unemployment were eligible for an additional $600 weekly until the end of last July. Weekly bonuses picked up again with last year's December relief package, but for half the amount, $300. It doesn't appear that the renewed $300 weekly bonuses can be applied retroactively.
Could enhanced pandemic benefits continue after September?
It's possible. But much depends on what happens with the economic rebound over the summer and the debate over unemployment programs.
For example, while some members of Congress have pushed for the additional unemployment insurance money to continue through the pandemic, other lawmakers are outright opposed or increasingly skeptical of the added benefit, according to Politico.
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What else is there to know about state cutoffs and unemployment benefits?
States have a limit on how many weeks a person can stay on unemployment. Most provide 26 weeks, with some granting as few as 12 weeks and others as many as 30 weeks. Before the American Rescue Plan, the federal government had extended pandemic relief benefits to the unemployed an additional 24 weeks. Under the current package, federal unemployment insurance will be extended through Labor Day, offering a total of 53 weeks of additional benefits -- except for states opting out.
While many states have automatically renewed unemployment insurance benefits, some recipients may have issues when they reach the benefit year-ending date. States limit benefits to one year, and that compensation is typically cut off after that date. Many states require recipients to either file a new claim or request an extension. Because it varies from state to state, those who have been unemployed for at least a year should get in contact with their state's labor department.
What about the tax break on 2020 unemployment benefits?
First, it's important to know that the IRS treats unemployment insurance as income, which means it's subject to taxation. In most cases, the state can withhold taxes like a typical paycheck. However, it's estimated that 10 million unemployment benefit recipients had no taxes withheld, which means they would've owe a substantial amount when filing tax returns.
To counter that, the March stimulus law included a tax exemption of $10,200 (or up to $20,400 for those filing jointly) for those with an adjusted gross income under $150,000 during 2020. How does the exemption in the new legislation work? The first $10,200 of unemployment insurance will not be taxable -- so if someone received $20,000 in benefits in 2020, they would only be taxed on $9,800 of it.
Some states are not providing a tax break. According to a chart by the tax preparation service H&R Block, 11 states aren't offering the tax break: Colorado, Georgia, Hawaii, Idaho, Kentucky, Minnesota, Mississippi, New York, North Carolina, Rhode Island and South Carolina. Other states, like Indiana and Wisconsin, are only offering a partial tax break.
When will the IRS send out unemployment tax refunds?
According to the Department of the Treasury, some 7.3 million people are eligible to receive unemployment tax refunds. The IRS announced it sent out the first round of tax break refunds to those eligible. The agency will continue to issue refunds through the summer as it processes tax returns and reviews taxes paid on 2020 unemployment benefits.
The IRS has issued instructions on how to enter the exemption on tax forms. People who already filed their taxes this year without the exemption will have their returns automatically recalculated by the IRS. (Those refund checks have already started being issued.) While the IRS has said that taxpayers do not need to file an amended federal tax return to get their tax break, a handful of states are requiring taxpayers to file an amended state tax return to get a state refund. Here's how to find out your state's rules.
What about Mixed Earner Unemployment Compensation, or MEUC?
For the first time, the original CARES Act in early 2020 allowed some self-employed workers to temporarily qualify for unemployment benefits. The December 2020 stimulus bill had added additional compensation for someone earning a mixed income from a traditional job and employment as a contractor, who would either receive the unemployment insurance payment or PUA, but not both.
With the Mixed Earner Unemployment Compensation program, a person who made substantial income from self-employment or a contracting job could receive an extra $100 a week. The MEUC was also extended with the American Rescue Plan Act until Sept. 6, though some states are bowing out of that aid as well.
For example, let's say you made $50,000 in 2019, which was split between $30,000 from a contractor job and $20,000 from a part-time job at a company. If you were laid off, the state unemployment office would calculate whether you'd receive benefits for the $30,000 via PUA or $20,000 via unemployment insurance, but not a combination of the two.
Though someone who works a traditional job and makes $50,000 a year in New York would receive $480 a week from unemployment insurance, by having a mix of the two you'd get the greater of the two different amounts, which would be the PUA of $288 a week rather than the $280 from unemployment.
Mixed Earner Unemployment Compensation will now give that person an extra $100, but only if the state participates.
Is it still possible to apply for unemployment insurance?
If you've been laid off or furloughed, you're qualified to apply for unemployment benefits in the state where you live. Once the state approves your claim, you can apply to receive whatever state benefits you're entitled to. Because states cover 30% to 50% of a person's wages, there isn't a single sum you could expect on a national basis. Each state's labor office provides information about its particular unemployment benefits.
Eligibility criteria vary from state to state, but the general rule is that you should apply if you've lost your job or been furloughed through no fault of your own. This would include a job lost directly or indirectly because of the pandemic.
In February, the federal Department of Labor updated its eligibility requirements to include people who refused to return to work due to unsafe coronavirus standards.
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