| Wednesday, December 3, 2008 |  |
Pink Slip Blues: Qualifying for Unemployment BenefitsIt's final. Soon you won't be working at the same old place. Maybe you're sad, angry, or just plain glad. Regardless of your emotional state, one of your first priorities is applying for unemployment insurance. It's important to file right away. Your first compensation check can take up to two to three weeks to arrive once you've filed a claim. The good news is that in more than half of the U.S., you can use the phone or file online rather than waiting in line. Among those states requiring you to file in person, you often can do subsequent reporting over the phone. For all filing venues, you will be asked about your work history to qualify. To find out your state's requirements for eligibility, go to the National Association of State Workforce Agencies Web site. Do I qualify?While state unemployment laws vary, some basic rules apply. Usually you need to have worked the first four of the last five quarters. You won't qualify if your employer claims you were fired "for just cause." Drug use, missing work without prior authorization, and insubordination usually are clear causes for termination and if they are the reason you were fired, you probably won't be covered by unemployment insurance. Quitting often disqualifies you from getting unemployment insurance unless you can prove sexual on-the-job harassment, "good cause," or other exceptions as defined by your state. Often you can find these exceptions listed online. If your firm was downsized and you were laid off, then you have a clear case for filing a claim. Being fired because you refuse to relocate is also basis for a claim. Unemployment insurance only covers so muchBe aware that the average benefit is $200 a week, and if you receive severance pay or opt for early retirement, this benefit may be reduced or eliminated. In other words, "double dipping" is not allowed. However, once severance pay runs out, most employees are eligible for standard unemployment benefits, lasting about 26 to 30 weeks (six and a half to seven and a half months). If you know of your layoff in advance, you may want to consult a financial planner or qualified credit union employee to review options regarding your investment portfolio (401(k)s are particularly tricky), upping automatic payroll deposits into your savings account, and reducing outflow via a new, stricter, budget. Interestingly enough, experts advise you wait to pay off mortgage debt. That's because other debts have higher interest rates without any associated tax benefits. A qualified credit union representative also can tell you if you can save money on interest by If this is the first time you've received unemployment benefits, you may think it's free money. Unfortunately, it's not that simple. You need to show proof that you're looking for another job, and at the end of the year you'll be expected to give Uncle Sam some of the money back in federal unemployment insurance taxes. The same is true in some states; check in yours. Once you start receiving benefit checks, every two weeks, you'll report, either by phone or through a detailed written log, your efforts to find gainful employment. This doesn't mean that you have to accept an entry-level job, but you should be sending out resumes and doing interviews. Remember, you only have about six months to find your next dream job, so reporting is actually a great motivator toward getting it. Remember, too, that you have to pay taxes on all income including unemployment benefits. If you consult on the side and get paid more than $400, then you have to pay self-employment tax (15.3%). To avoid an unpleasant surprise when the time rolls around, request that your state withdraw the necessary amount from each benefit check or have your credit union put it into a special account once you deposit it. For self-employment taxes, figure what you owe on a quarterly basis and send it to the government directly, or have your credit union deduct the amount and put it in a A special tip on taxes: Make sure to hang on to your final pay stub. It will help you determine your taxes ahead of time and can be used as a record should your company fail to provide you with a W-2. Attach a copy of the stub to your tax form and let the Internal Revenue Service know that you did not receive a W-2 and are basing your payments on the stub. On the upside, you can get numerous itemized tax breaks when unemployed. You can deduct expenses related to your job search, including resume preparation and mailing, travel expenses, educational course updating (if it leads to a job in your field, but not if it leads to a new career), and moving expenses not reimbursed by your new employer.
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