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What the Stimulus Bill Means for Freelancers, Gig Workers & Self-Employed

what the stimulus bill means for freelancers, gig workers and self-employed


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Whether we’re officially in a recession or there’s one on the horizon, the last few weeks has turned the labor market upside down. Semantics aside, nearly 10 million Americans have lost their jobs so far, with more job losses to come.

During “normal” economic downturns, freelancers, gig workers, and the self-employed would be out of luck when it came to unemployment benefits. However, everything that’s happening right now is far from normal. And while that isn’t exactly a good thing, the federal government has taken note and passed legislation that could be a lifeline for freelancers and gig workers.

Fortunately, most of the benefits available to these worker classifications are nearly automatic. However, you should review the rules carefully to understand what (and how much) you are eligible for and how it can impact your taxes. And, as always, when it comes to all things tax-related, speak to a qualified tax expert if you have questions.

The Coronavirus Aid, Relief and Economic Stimulus Act

The Coronavirus Aid, Relief and Economic Stimulus (CARES) Act is likely the bill you’ve heard about. The CARES act essentially widens the unemployment and benefits safety net to workers that, under normal circumstances, would not receive them.

While there’s much to the CARES act, the important part is that freelancers, gig-workers, the self-employed, and even part-timers are now eligible for unemployment benefits. And, just as important, in some cases, people who were about to start a new job but now can’t due to coronavirus or those who quit their job due to coronavirus might be eligible to collect unemployment.

The Families First Coronavirus Response Act

The Families First Coronavirus Response (FFCRA) Act is separate from the CARES Act and one you’ve possibly heard less about. The FFCRA temporarily guarantees paid sick leave to most employees.

That doesn’t mean that everyone is eligible for paid sick leave. Freelancers and gig workers, for example, are not automatically entitled to paid sick leave via the Act. However, depending on your circumstances, if you’re unable to go to work (or work from home) for one of six reasons (all related to coronavirus), gig workers and freelancers can claim a credit against their self-employment taxes.

The tax credit will be 50% of qualified wages that you earn between March 13, 2020, and December 31, 2020. However, if you’re caring for a sick family member, the credit is either for up to 50 days of lost work or a maximum of $200 a day (but not all gig workers will qualify for this credit).

What Unemployment Benefits Will CARES Provide?

For as much talk as there’s been about what you’ll get under CARES, there’s no “guaranteed amount.” Ultimately, the amount you’ll receive in unemployment benefits is based on what state you live in.

As part of the CARES Act, freelancers will receive $600 a week in federal benefits in addition to state unemployment benefits. However, you will only receive that additional $600 for a maximum of four months, and the benefit ends on July 31, 2020.

Since a freelancer’s income can vary from week to week, most freelancers will have their state unemployment benefit calculated using the Disaster Unemployment Assistance Program formula (which is roughly your highest wages for a given quarter, divided by 25, then rounded to the nearest dollar).

And, because these are extraordinary circumstances, the Act also revived the Emergency Unemployment Compensation Program. If that sounds familiar, that’s because it was part of an emergency relief bill that was passed in response to the 2008 recession. This makes it possible for you to collect unemployment benefits for a total of 39 weeks.

Freelancers, gig workers, and others are also eligible for the $1200 one-time assistance payment. That’s $1,200 per adult or $2,400 per couple. You may also receive $500 per child. As long as you earned less than $75,00 in 2019 (or 2018, if you haven’t filed your taxes yet), you’ll receive the full amount. If you earned more than that, the benefit starts to phase out.

Finally, as a self-employed individual, you should pay your estimated tax payments quarterly. However, the CARES Act allows you to delay quarterly tax payments until October 15, 2020.

This Isn’t Free Money

While you likely need the money now, keep in mind that this isn’t it “free money.” This stimulus bill is essentially an advance on your income for 2020. Depending on what you end up earning in 2020, you may have to pay some of your stimulus money back on your 2020 or 2021 taxes.

How to Access the Benefits

As long as you filled your taxes in 2019 (or 2018, if you haven’t filed yet), there’s nothing for you to do to receive the $1,200 check. If you’ve used direct deposit with the IRS in the past, the money should appear in your account sometime in April. If you haven’t used direct deposit, you may have to wait several weeks for the check to arrive in the mail.

If you’ve never filed a tax return or typically don’t need to, you must file a simple return for 2019 to receive the check.

To receive unemployment benefits, you must file a claim with your state’s unemployment office. Unfortunately, there have been multiple reports of long lines or overloaded websites and phone systems, so you may need to try several times before you are successful.

The CARES Act encourages states to waive the one-week waiting period for filing for unemployment benefits. However, it’s unclear if states are waiving the waiting period or not (as it’s not required).

Also, it’s still unclear how gig workers and freelancers are supposed to apply for benefits. Because freelancers have never received unemployment benefits before, state unemployment offices do not have the necessary forms in place, and it may take some time for the states to create the paperwork.

Paycheck Protection Program

The CARES act also includes the Paycheck Protection Program. The Small Business Administration will distribute $350 billion in loans that can be partially forgiven under certain circumstances.

The important aspect for freelancers is that these loans are available for businesses that employ less than 500 people—which includes freelancers, independent contractors, and sole proprietorships.

The loan amount will only cover eight weeks of payroll (as long as the salary does not exceed $100,000), business debts (like rent), and benefits (health insurance or paid sick leave). Accepting the loan also comes with additional limitations and restrictions.

Other Resources

Beyond the CARES act, there are other resources you may want to tap into:

Help For All

These extraordinary circumstances are impacting nearly everyone around the globe. Fortunately, help is on the way, though it may take some time to arrive.

For more advice on navigating unemployment, freelancer life, and working during the pandemic, sign up for our newsletter. You’ll get all of our best advice delivered right to your inbox for free.

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Photo Credit: bigstockphoto.com

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Rachel Pelta is a Content Coordinator for FlexJobs. With professional experience in job placement and as a manager, she creates content to help people succeed in their job search, and to help managers get the best out of their staff.…Read More >

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