How Unemployment Benefits Began

Unemployment benefits are jointly financed through payroll taxes collected by the U.S. federal government and individual state governments. The concept of unemployment benefits in the U.S. began in Wisconsin in 1932. The federal government then encouraged all 50 states to develop their own unemployment benefit programs through the Social Security Act of 1935.

Under current laws, an employer is generally required to pay unemployment taxes for an employee when the total wages paid to an employee are equal to or greater than $1,500 in a calendar quarter or the employer has at least one employee working for them at least one day a week for 20 calendar weeks (even if the 20 weeks were not consecutively worked). If you are an employer you should look at the specific laws of your state to ensure that you are withholding unemployment taxes for all of the proper employees.

Who Doesn’t Qualify For Unemployment Benefits

In general, an individual is not eligible for unemployment benefits when the worker was a part-time, self-employed, or temporary employee. A person who loses a job due to his or her own fault is also not eligible for benefits. This includes quitting, being fired for cause, resigning because of a prolonged illness or disability, attending school, being a part of a labor dispute or being fired for misconduct. Most states also require that you have worked the first 4 out of the last 5 quarters before you were laid off.

How Much In Benefits Are You Entitled To?

The amount of benefits you are entitled to can vary depending on what state you live in. However, the payment amount is based upon the d0llar amount the employee earned with the employer and the total number of quarters the employee had worked for that particular company. On average, an unemployed individual receives 36% of the amount the individual earned at the former job. You need to file for unemployment benefits as soon as possible after you have lost your job. Depending on where you live you may be able to file for benefits through the Internet or you may need to go to your local unemployment office.

Information You’ll Need to Apply

In general, you will need to provide the following information when you apply for unemployment benefits:

  1. Social security number (or alien registration card if you are not a U.S. citizen)
  2. Mailing address and phone number
  3. Drivers license number (or state identification card ID number)
  4. Names, addresses and dates of your former employers and employment (generally 2 years of employment history)
  5. How much you eared while you were employed with each employer
  6. Employer’s federal tax ID number (“EIN” number – this information can be found on your W-2 form or pay stub)

The unemployment application may also ask you whether you are owed any vacation or overtime pay that you have not yet received and why you are no longer employed. As discussed above, you will only be entitled to unemployment payments if you are now out of work through no fault of your own (including quitting).

Be sure to check what information your state requires in order for you to file an unemployment benefits claim. It may take a few weeks before you begin to receive unemployment checks. Some states require a waiting period by law. On average it takes 2 weeks before you are paid.

Once you are approved for unemployment benefits you may also need to decide on whether you want taxes withheld from your unemployment checks. Unemployment benefits are generally considered taxable income and it must be reported on your federal and state income tax returns. Some states will automatically keep 10% of the benefits you are scheduled to receive to cover the tax liability associated with the paid unemployment benefits. Consult with a competent tax adviser if you are unsure how to answer this question. As you continue to receive state unemployment benefits, some states will also provide to you a user name and password to log into their unemployment benefits system and track the payments previously made and the future benefits you are scheduled to receive.

How Long Are Benefits Initially Paid For?

Most benefits are paid for up to 26 weeks although many people will also be eligible for benefit extensions. While you are receiving your unemployment benefits you should be looking for new employment to try and replace the income you had with your previous job. Many states will require you to actively search for a new job while you are receiving unemployment benefits. Among the many different job search resources you can find online, all states have a job services office to help unemployed citizens become employed again.