If you lose your job or are out of work through no fault of your own, you may be eligible for unemployment benefits. If you quit for good cause, are fired for anything other than misconduct, or were laid off and your earnings meet a certain threshold, most states will provide you with unemployment. Before you start cashing in, here are some factors you should consider.
Who Qualifies for Unemployment Benefits?
Though unemployment eligibility varies from state to state, there are a few rights that are fairly consistent across the board. Here are a few of them:
- Some States Allow You to Collect if You Quit – Some of the circumstances where you can collect unemployment if you quit include domestic violence, lack of work, caring for an ill family member, medical reasons, and constructive discharge, where the working conditions become intolerable for a reasonable person.
- You Can Take Your Children Out of Childcare While Unemployed – If you want to save money while collecting unemployment benefits, you can keep your children out of day care and watch them yourself. The only requirement is that you must be actively looking for jobs and available to work.
- Your Unemployment Benefits Will Last for Half a Year – Almost every state offers unemployment for 26 weeks. This varies depending on when and where you filed your first claim and how the economy is doing. Occasionally, Congress will authorize Emergency Unemployment Compensation that will help the unemployed for upwards of 70 weeks.
- You Have the Right to Appeal a Denial – Many unemployment claims are initially declined. However, you have the right to appeal a denial of benefits decision.
Why You Might Want to Think Twice About Collecting
Come tax season, many recipients of unemployment benefits are surprised to find out that the payments they received are taxable. In some states, you can choose to have the taxes taken out. If you do not go this route, you should expect a big financial hit when you file your tax return.
If you are part of a union that also pays you benefits, that money is taxable. Though it may be hard to think about taxes when you are already cash strapped due to a loss of work, it is crucial that you plan early. A good rule of thumb is to set aside 25% of any income that you receive that could be taxed later on. That way, when tax season comes, you will be ready to pay.