How To Get Rid Of Unemployment Overpayment

Photo to accompany story about unemployment benefits.

Getty Images/Noami Galai

A GrubHub delivery person exits a restaurant last month in New York City. Gig workers and independent contractors could have to pay back unemployment benefits if they fail to meet new requirements.

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Millions of workers could end up having to pay back unemployment benefits if they don't submit newly required paperwork supporting their claims.

The new requirements apply to the 3 to 4 million gig workers and independent contractors who receive unemployment benefits from the Pandemic Unemployment Assistance (PUA) program that was recently extended through March, according to unemployment researcher Andrew Stettner.

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"Those individuals are going to have to substantiate their employment and prove their identity, even if they had not done so in 2020. They also have new requirements to certify that they are still out of work due to COVID each and every week," says Stettner.

The new stimulus package that passed in late December extended the PUA, a program that was originally established in the CARES Act in May 2020 to extend unemployment benefits to gig workers, independent contractors, and other workers who normally wouldn't qualify. So if you're an Uber driver, freelance writer, consultant, or any other type of independent contractor who has lost work and filed for unemployment, this deadline could apply to you.

At issue is a new threshold of proof for individuals to continue or start receiving benefits through the PUA. For workers who apply (or re-apply) for these benefits before Jan. 31, they'll have 90 days to provide this extra documentation, which includes things like W-2s, tax returns, and business receipts. Failure to follow through with this extra verification could result in having to pay back any benefits received since the week of Dec. 27, 2020.

When the 90-day period starts varies by state. Federal guidance says individuals must provide the documentation "within 90 days of the application date or the date the individual is instructed to provide such documentation by the state agency (whichever is later)."

For people who file for these extended PUA benefits between Jan. 31 and when they are currently set to expire on March 14, they'll have 21 days to provide this information.

While every PUA claimant going forward will need to provide this documentation, you might have already submitted many of these documents if you filed to increase your benefit amount through the PUA in May. Some people who qualified for more than the minimum PUA payment (because their loss of income was greater) already had to submit these documents.

But if you only received the minimum benefit amount from the PUA, which is 50 percent of what you normally earn, you will likely need to file further documentation with your state to continue receiving benefits and avoid paying back any benefits you've already received.

Make sure you double check to see if you need to submit further documentation. If you're not sure, submit it anyway. You can find more information on your state's requirements through your state's department of labor. Even though some people may have submitted these documents previously, Stettner said many states failed to properly document it, and the U.S. Government Accountability Office also found inconsistencies in how different states implemented and reported on the program.

Documentation Needed

For workers who need to provide increased verification to support PUA claims, the following documents may be required:

Paycheck stubs
Earnings and leave statements showing the employer's name and address
W-2 forms

For proof of self employment, you may need to provide:

State or federal employer identification numbers
Business licenses
Tax returns
Business receipts
Signed affidavits from persons verifying the individual's self employment

Exact needs will vary by state. Check with your state's department of labor for your requirements.

Paying Back Benefits

If you do not submit your documentation on time, or are deemed ineligible to continue receiving PUA benefits, you could have to pay back any benefits you've received since Dec. 27, 2020.

Each state has different overpayment recovery procedures. Possible methods of collecting that repayment include offset of future benefits, reduction in tax returns, or other repayment plans.

There is also uncertainty about the states' ability to comply with these heightened requirements, and their ability to process an onslaught of new documentation.

"It could end up being in the millions of people who have not [sent their documents] yet and then states will have to process those within 90 days," says Stettner. "That's a big requirement."

This backlog could result in delayed benefits for new claimants, so the more documentation you can include with your claim, the better your chances of avoiding any issues down the line.