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CARES Redux – Redeployment of Unemployment Benefits and Stimulus Checks

In 1978, the members of the English reggae and pop band, UB40 (“Red, Red Wine” and “I Can’t Help”), met while standing in line at that the UK government’s Department of Employment. Each member was an unemployed musician. In order to receive benefits, they needed to file the Unemployment Benefit Form 40 (“UB40”). They decided to name their band UB40 as a tribute to the unemployment benefits they received that kept them able to remain as a band.

In 2020, over 28 Million Americans are receiving unemployment benefits. In March 2020, the CARES Act created the Federal Pandemic Unemployment Compensation program (“FPUC”) to assist unemployed workers who were already eligible and receiving state unemployment benefits.  The amount was an extra $600 weekly payment.  Unfortunately, the additional $600 payments expired on July 31, 2020.  In response to this, President Trump issued the Lost Wages Assistance (“LWA”) as an executive order. These payments were extended during the summer of 2020, in the amount of $300, but only for a period of 3-5 weeks depending on individual states.

PUA

In addition to FPUC, the CARES Act established the Pandemic Unemployment Assistance program (“PUA”). PUA allowed unemployment benefits to be made available to self-employed, part-time workers, as well as to gig workers. Gig workers are traditionally defined as independent contractors, online platform workers, contract firm workers, on-call workers , as well as temporary workers.  PUA benefits are only eligible to workers who would not be eligible for traditional unemployment compensation under their applicable state unemployment statute and FPUC. In order to be considered an eligible recipient, an individual must qualify under the variety of specified reasons related to Covid-19. The specified reasons related to Covid-19 generally are triggered if there is a diagnosis, child care, quarantine, job loss, death, termination or workplace closure attributable to the pandemic.

The benefit amount under PUA depended on how the individual’s state unemployment compensation was calculated.  Benefits under PUA were available for eligible recipients for any week of unemployment that started on or before January 27, 2020, and were available for up to 39 weeks.  Unfortunately, the PUA program was set to expire on December 26, 2020.

PEUC Program

The CARES Act also created the Pandemic Emergency Unemployment Compensation (“PEUC”) program. Under PEUC, states were authorized to extend unemployment benefits for a period of up to 13 weeks beyond the traditional 26 weeks of benefits provided to jobless workers by most states.  The 13 week period began on the week a taxpayer’s applicable state initiated PEUC and allowed these benefits up until December 26, 2020. To be eligible to participate in PEUC, individuals must have exhausted all rights to regular unemployment compensation under state or federal law. These individuals also had to be able to work, available for work, and actively seeking work as defined by state law.

The Consolidated Appropriations Act

As the old saying goes “good news comes to those who wait”.  Under Congress, the new saying should probably be amended to “good news comes to those who wait and wait and wait”.  Fortunately, Congress recently passed a brand new stimulus package titled the Consolidated Appropriations Act (“CAA”).   CAA helps the unemployed in several different ways by the issuance of an extra $300 per week up to 11 weeks under the PEUC and PUA.  The payments could start as early as December 27, 2020 and extend through at least March 14, 2021.  It is prudent to note that no payments will be remitted to individuals under the PUA or PEUC after April 5, 2021.  It also provides an extra benefit of $100 per week for certain workers who have both wage and self-employment income but whose base unemployment benefit calculation doesn’t take their self-employment into account.  In effect, CAA  increases the maximum number of weeks an individual may claim benefits through regular state unemployment plus the PEUC program, or through the PUA program, from 39 weeks to 50 weeks.

Stimulus 2.0

The March 2020 stimulus check in the amount of $1,200 for qualifying adults and children phased-out for individuals who earned between $75,000 – $99,000. Married couples filing jointly earning between $150,000 – $198,000 suffered a similar phase out.  CAA authorizes the payment of an additional stimulus check in the amount of $600 for those same qualifying adults and children.  For the second round of payments authorized under CAA, the amount of the stimulus check will be subject to the same income phase-out.

The Treasury Secretary has indicated that the new $600 stimulus checks could “potentially” be mailed directly to taxpayers before the end of 2020.  It is prudent to note that not every individual who qualifies for the $600 stimulus check will receive it immediately.  As with the initial $1,200 payment, many taxpayers didn’t receive their checks until weeks and months later.

Conclusion

The recent passing of CAA provides some much needed relief to the millions of unemployed workers in this country.  While we are not so sure whether the terms PUA, PEUC or even CAA would make a good rock or reggae band name (but perhaps CARES would be), we are confident that the relief granted in CAA will be a welcome present during the upcoming holiday season.

Author: Jeffrey A. Clayman, CPA, JD, LLM

As always, tax laws are somewhat complex and nuanced.  Please consult your Withum tax advisor if you have additional questions or concerns.

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