What are Partial Unemployment Benefits?


Owen Yin


Reviewed by


August 18, 2020

This article is Tax Professional approved


Unemployment benefits get tricky to understand if you have more than one job, have a PPP loan, or are earning extra cash in general. Here’s our summary of what you should expect. For more detailed info on unemployment benefits, check out our free state-by-state breakdown.

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What are partial unemployment benefits?

Partial unemployment benefits provide some extra financial support to those who are not fully employed and are looking for full-time work. For example, a worker who has been laid off but found a temporary part-time position would not be considered fully employed, but partially or “underemployed”. They can receive a partial unemployment benefit to help cover expenses. All states have some sort of partial unemployment policy.

How do states calculate partial unemployment benefits?

The state determines your weekly benefit amount. Each week, you will claim unemployment benefits, where you will also report any income you earned. To account for this earned income, the state will generally subtract your reported earnings from your weekly benefit amount, after factoring in your earnings disregard. The earnings disregard is an amount that you can earn without having it affect your weekly benefit amount.

The earnings disregard varies by state. Find your state’s earnings disregard for unemployment benefits in our guide.

Individuals who qualified for partial unemployment benefits also qualified for the $600 PUA supplement, but this program has ended. The President has issued an executive action to relaunch the program, but it will take time for participating states to put this into place.

Can I collect unemployment benefits if I was laid off from my job, but I also have a side hustle?

Yes, you would qualify for partial unemployment benefits. You are expected to report any additional income you earn to the state in your weekly certification. Income needs to be reported in the same week it was earned, which is not always the week it was paid out. So it doesn’t matter when you received the paycheck, but when you earned those wages.

Can I collect unemployment benefits if I’ve lost my side hustle income, but I still have a full-time job?

Unfortunately no. If you still hold a full-time position but you lost income from your side gig, you would not qualify for unemployment benefits.

For example, if you work remotely full-time, but stopped taking on freelance jobs, you are still considered to be fully employed and would not be eligible to claim benefits. Of course, if your full-time job was impacted as well and you work reduced hours, you could still qualify.

Can I collect partial unemployment benefits if I have a PPP loan?

It’s possible, but a common misconception is that you can benefit from both with no issues. The bottom line is that you cannot double-dip on both the PPP and unemployment. If you are a self-employed individual who received a PPP loan, you need to report your owner’s compensation replacement to the labor office. The labor office will make the appropriate adjustment for your weekly benefit amount.

If you did not report your PPP income, you should retroactively do so. The state will reassess your benefits and you may need to repay some.

Considering a PPP loan? The program has expired, but Congress may relaunch it. Here’s our comparison between PPP and unemployment benefits.

How do I account for unemployment benefits in my books?

Unemployment benefits are paid to the individual, not to a business. So there’s no need to record unemployment benefit payments in your business’s books. Your benefits should be deposited into your personal account.

Wondering about the difference between personal and business bookkeeping? Find out more.

What if I’m not sure if I’m eligible for unemployment benefits?

The best way to find out is to make a claim! The state will do the necessary calculations. They’ll see if you have sufficient past earnings to qualify and determine how much your weekly benefit will be.

Are unemployment benefits taxable?

Yes, all unemployment benefits are taxable income. You can ask the state to withhold a portion of your benefit amount for taxes, so you don’t face a large tax bill at the end of the year.

Additional COVID-19 resources

Final thoughts

Partial unemployment benefits are worth keeping in mind if you’re earning income so you aren’t surprised by your weekly unemployment benefit. PPP loans and unemployment benefits can play nice with each other, but you need to be careful to not accidentally double-dip. Bench’s bookkeeping services can help your small business keep track of every single business expense so you know exactly where the money goes.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.
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