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Unemployment Compensation: Definition, Requirements, Examples
In situations when people lose their jobs due to a reason for which they are not responsible, then those people are eligible to receive unemployment compensation. The state provides this compensation to individuals who are now unemployed. This compensation allows workers to have a source of income when they get jobless.
However, there are certain criteria a jobless worker has to meet to get unemployment compensation. In this article, we will discuss some of the details regarding this topic. You will also learn how the state?s unemployment compensation system works. Apart from that, you will also learn about how to report for this compensation if you have lost your job without your fault. Hence, read on to find out more.
What Is Unemployment Compensation?
According to Investopedia,
?Unemployment compensation is a benefit paid to people who have recently lost their job via no fault of their own, such as being laid off or if the business closed. Unemployment benefits are often calculated as a percentage of the average of the claimant?s pay over a recent 52-week period.?
The compensation that workers get here is paid either through check or direct deposit.
In cases when there are lay-offs by businesses due to recession (cyclical unemployment) or a situation when a business closes and the workers lose their jobs, the state offers unemployment compensation. The compensation system is created as per the joint policy of the federation and the state.
Here, the state offers the worker partial income replacement for a limited period of time, provided that the worker is actively looking for a job within that time frame. If the worker gets a job, the unemployment compensation is obviously stopped. In other cases, this term is also known as ?unemployment benefits? or ?unemployment insurance.?
How Does Unemployment Compensation Work?
Unemployment compensation is mostly available in developed economies and some developing economies. Since the United States is a developed economy, the state provides unemployment compensation to workers who lost their jobs because of a reason that was not their fault in any way.
The system of compensating the jobless workers is managed jointly by the federal government and the state government concerned. The benefits that the workers get are based on the average pay of the worker over a recent 52-week period. Furthermore, how the compensation is calculated in the system, is varies from state to state.
The benefits that you will get through your unemployment compensation are paid by the state government of the state in which you are residing now. However, the compensation is funded by the state and federal payroll taxes that employers pay.
In general cases, most states provide benefits for 26 weeks. However, depending on the financial situation of a state, this number can go up to 30 or go as down as 12. In periods of high unemployment, the numbers get extensions as well.
Are You Eligible For Unemployment Compensation?
If you want to become eligible for unemployment compensation, you will need to meet some specific criteria. You will need to prove here that the termination of employment (the job you lost) is not due to a fault of yours. Apart from that, you will also need to show that you have worked for a minimum stipulated period and you are also actively looking for a job.
Every state has its own requirements for providing benefits to jobless workers as unemployment compensation. Hence, the eligibility requirements can vary a bit from state to state. However, the major aspects of the system of unemployment compensation are more or less common in every state.
Apart from that, how much a state offers compensation or for how long the compensation is given depends a lot on the finances of the state.
How To File For Unemployment Compensation?
According to the official website of the US Department of Labor,
?To receive unemployment insurance benefits, you need to file a claim with the unemployment insurance program in the state where you worked. Depending on the state, claims may be filed in person, by telephone, or online.?
Once you have become unemployed, you must immediately contact your state?s unemployment insurance program. However, you will need to ensure here that you are eligible for unemployment benefits.
Here, once you contact your state?s program, you will need to file a claim for unemployment compensation. You will find certain information about your former employment, like dates, contacts, and addresses. Always give the full and correct information, as it will ensure that there is no delay in your compensation.
Once you file your claim, it will take about two to three weeks until you receive your first check regarding unemployment compensation.
Note: If you worked in another state where you lost your job (that is, a state that is different from the one you are residing in now), you must provide the information to your current state. The state?s unemployment insurance agency will offer you information about how to file your unemployment compensation claim with the other state.
Is Unemployment Compensation Taxable?
According to the official website of the Internal Revenue Service,
?Unemployment compensation is taxable income. If you receive unemployment benefits, you generally must include the payments in your income when you file your federal income tax return?Some types of unemployment compensation are taxed differently based on the program paying the benefits.?
You can find out whether your unemployment compensation is taxable or not by checking the Tax Assistant tool on the IRS website. You can also report your unemployment compensation with the help of Form 1099G (which is about Certain Government Payments). Here, you will have to write the amounts of the compensation that you received from the state during the year.
Wrapping Up
Hope this article was helpful for you in giving you a better idea of what unemployment compensation is and how it works. If you want to file a claim for unemployment compensation, you must contact your state?s unemployment insurance program now.
Depending on the state you are in, and the type of unemployment compensation that you are getting, you must check whether it is taxable or not. Do you have any other recommendations related to unemployment compensation? Share your views with us in the comments section below.
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