Since the original CARES act in March, I’ve been trying to provide practical, real-world guidance on the nuances of federal and state aid to unemployed and self-employed workers. For reference:
- In May I shared my successful EIDL loan application;
- In July I asked whether the PPP program was designed to fail;
- In August I broke down what programs were still available as the CARES act was allowed to lapse;
- And in December I shared some nuances on the interaction of the Pandemic Emergency Unemployment Compensation and Extended Benefits under the December 27 relief act.
One brand new program was created under the December 27 act that has received very little attention because, like all these programs, it has taken the states weeks or months to implement the necessary changes to their unemployment insurance systems: the Mixed Earners Unemployment Compensation program. Since applications are now finally opening up nationwide, it’s time to talk about it.
The two pandemic unemployment tracks
An enormous amount of federal aid has been pushed out to unemployed workers through the unemployment insurance system since the end of March. That aid has been distributed along two “tracks:”
- Workers who are paid through a W-2 payroll system, and who met the income and duration eligibility requirements for unemployment insurance (typically based on the 4 full calendar quarters of employment preceding the previous full calendar quarter) were put on the “traditional” unemployment insurance track, and receive first UI, then PEUC, then Extended Benefits.
- Workers who are self-employed, who report their income on Schedule C, or whose earning and employment history did not make them eligible for unemployment insurance, were offered a brand new and temporary program called Pandemic Unemployment Assistance.
Both traditional UI and PUA participants were eligible for the $600 Federal Pandemic Unemployment Compensation top-up through July and the $300 top-up beginning in December and scheduled to run through March.
It’s impossible to overstate the revolutionary potential of the PUA program. Small business owners, freelance workers, and mis-classified “gig economy” employees, who had been deliberately and explicitly excluded from the employment-based safety net, were for the first time eligible for income replacement similar to that received by workers paid through payroll. While the program was temporary, and had slightly shorter time limits than the traditional benefit track, the usefulness of such a program has become so blindingly obvious that it feels like it can only be a matter of time before something similar is passed into permanent law.
What is MEUC and why was it created?
The single most important thing to know about the two unemployment insurance tracks is that they were mutually exclusive and you weren’t offered a choice between them: PUA was only available to those ineligible for traditional UI. That means someone working a minimum wage job 20 hours per week, perhaps to qualify for employer-provided health insurance, who also ran a prosperous wedding photography business, wasn’t able to claim PUA benefits based on their lost photography income and instead was forced to file for traditional unemployment insurance based on their meager wage income.
This is, objectively, not a particularly common situation. For all that we hear about the “gig economy,” the overwhelmingly majority of workers are correctly classified as W-2 employees in any given year, those who do have side income typically earn very little in a given year, and workers with spotty employment and earnings records were already made eligible for PUA. Of course you can come up with possible examples from your own profession: a software engineer who builds apps on the side, or a doctor who picks up occasional emergency department shifts in addition to their family practice. These people exist! There just aren’t very many of them, and only a subset of them become unemployed in any given year, with or without a pandemic.
Nonetheless, through some combination of a late-breaking sense of fairness and a particularly vocal lobby, this seeming injustice was rectified in the December 27 act through the created of the Mixed Earners Unemployment Compensation program.
How does MEUC work?
Now that applications are available in many states, the design of the program is fairly simple. To qualify for MEUC, you must:
- be enrolled on the “traditional” unemployment insurance track — PUA recipients are categorically ineligible;
- have earned $5,000 or more in self-employment income in the calendar year preceding the year your unemployment benefits began.
MEUC benefits are $100 per week, are added to your UI benefit, and are in addition to the current $300 FPUC top-up (for a total of $400 in addition to your base benefit).
The program is currently authorized to pay benefits for the 11 weeks ending January 2 through March 13 (or January 3 and March 14 if your state’s unemployment insurance week ends on Sundays), for a total of $1,100 to those eligible the entire time. The program was slow to roll out, but once you apply and are approved, benefits are retroactive to your first week of eligibility.
While I’m sure it was hell to implement for our noble unemployment insurance software engineers, the design of the program itself is straightforward, with two big red flags:
- First, unless you became initially eligible for unemployment insurance in 2021 (not initially approved, but initially eligible), your MEUC will be based on your 2019 self-employment income. Your 2020 self-employment income is totally irrelevant unless you became initially eligible in 2021.
- Second, you’ll be asked to prove the self-employment income that you are using to certify your eligibility for MEUC. If you correctly reported over $5,000 in net self-employment income on your 2019 tax return (the one you filed in 2020), then your 2019 1040 and Schedule C should be all you need. If you incorrectly or inaccurately reported your 2019 self-employment income, then you should expect your MEUC claim to take a long, long time to resolve. It probably will be, eventually, but if a claims examiner needs to go over dozens of check images for every job you did in 2019, you are not going to be at the front of the line for approval.
Now you know everything there is to know about the Mixed Earners Unemployment Compensation program. If you’re impacted, go apply for it. If you’re not impacted, you may know someone who is, so share this post with them. But even if neither you nor anyone you know is impacted, I still want to draw your attention to two points.
First, this is no way to run an income support system. Throughout the pandemic, Congress has passed temporary, small-bore expansions and extensions of the unemployment insurance system, placing an enormous burden on our fractured, understaffed, and underfunded employment agencies. If self-employed people need income insurance, they need it whether or not there’s a pandemic. If unemployed people need cash benefits, they need them whether or not there’s a pandemic.
There really are needs that have to be addressed on an ad hoc basis: when a pandemic emerges, people need vaccines. When a tornado strikes, people need temporary housing, not vaccines. When there’s a drought, people need water, not temporary housing. When there’s flooding, people need dikes, not water. But whenever people can’t work, they need money, and we need an income support system that reflects that fact on a permanent, not an ad hoc, basis. If you’re a wedding photographer it doesn’t matter whether you can’t work because of a pandemic, a tornado, a drought, or a flood, it matters that your rent is due and you don’t have any money, and that’s a problem that can only be solved with a steady, reliable income support system.
Second, and this hearkens back to a message I’ve been pounding since I started writing here, you should report all your self-employment income and pay taxes on it. Under-reporting of income inspires a kind of glee in people that has always been a bit bizarre to me. On the one hand, workers will say things like “I got paid in cash so I don’t have to report it” or “thank God I didn’t earn enough to trigger a 1099 this year.” On the other hand, busybodies will sourly cluck, “you know he’s paid in cash, he doesn’t pay any taxes on that money” as if the worker was somehow taking something from them. But both are wrong! When people under-report their income the only person they’re stealing from is themselves, in the form of decreased eligibility for SSDI, Social Security’s old age benefit, Medicare, and hopefully going forward benefits like a permanent PUA and/or MEUC.
Look, if you have 3 months to live, you have my heartfelt permission to forget about paying your taxes and any other bill to go party in Cancun until the curtain drops. But if you’re an ordinary person living an ordinary lifetime, you shouldn’t pay your taxes as a favor to anybody else. You should pay them as a favor to yourself.