For the most part, unemployment benefits are straightforward: You get money from your state when you are unemployed, and you don’t have to pay it back.
But every once in a while, something goes wrong, and a state overpays benefits. In that case, you may have to pay your state back.
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Why States Overpay Unemployment Benefits
Fraud is one reason states overpay unemployment benefits, but there are a lot of innocent situations that may lead to a state overpaying someone’s unemployment benefits.
— You made an error on the application. You didn’t mean to, but you made a mistake on your application resulting in a larger unemployment check than you should have received.
— The state bungled things. The state didn’t mean to, but something went wrong, and you were overpaid.
— Your former employer appealed. Your former employer appealed the decision to give you unemployment benefits and won.
According to a Government Accountability Office report, the federal government made “improper payments” of unemployment benefits in 2023 to the tune of $236 billion. According to the report:
— Underpayments accounted for $11.5 billion of that total. So just as you could be overpaid, you might be underpaid.
— Sometimes deceased individuals were paid unemployment benefits.
— Of these improper payments, $44.6 billion were “unknown payments” — meaning it was unclear whether a payment was an error or not.
What to Do if You Receive an Overpayment Notice
If you receive a letter notifying you of overpayment, “the first action is to call the number provided on your overpayment notice,” says Jaime-Alexis Fowler, founder and executive director of Empower Work, a San Francisco-based national nonprofit organization that aims to help employees struggling with work issues. “The wait times may be incredibly long, but connecting directly on the phone is the best option for understanding why the overpayment happened and what you can do.”
To handle long wait times, Fowler suggests this: “If you can’t get through to the number, contact your local state representative, who often has a staff person who can connect to your state’s unemployment office. A third option is to reach out to your local legal aid (office).”
Fowler says that you can look up your local office on the Legal Services Corporation website.
You can also call Fowler’s organization, Empower Work. “We support people facing challenges related to work, and unemployment is one of them,” she says.
Empower Work’s peer counselors won’t be able to fix any overpayment, she adds, but they’ll be able to point people to local resources.
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Do You Have to Pay Back Unemployment Benefits?
Usually, you never have to pay back unemployment benefits, except in the aforementioned cases, such as an error on your application that leads to an overpayment.
That said, you do have to pay taxes on unemployment benefits.
If your state asks you to repay the government, you typically have three options as a response, according to Ron Zambrano, employment litigation chair at West Coast Trial Lawyers, a personal injury firm in Los Angeles.
Repay the unemployment benefits. Maybe it becomes clear that you owe the state money. In that case, for many people, the answer is simple. As Zambrano puts it, “If you have no basis to contest the overpayment determination, you pay it back.”
Plead your case. Disagree with the state? You can file an appeal. “If you have a basis to contest the determination of overpayment, you can contest the decision, which requires a timely appeal of the decision or conclusion of overpayment,” Zambrano says. That leads to a hearing with an administrative law judge at your state’s employment development department office, he adds.
But don’t get your hopes up, Zambrano says. “This is a hard one to overcome as these determinations are based on very technical evaluation of data. For example, applicable rates of pay, applicable contributed funds, applicable timing of application, etc. These formulas can be complex,” he says.
Ask for mercy. If you can’t pay your state back, “you can also appeal the decision to say you just don’t have the money,” Zambrano says.
If you do this, you’ll probably have an in-person hearing with the administrative law judge at an employment development department, where you’ll explain your financial situation in detail, according to Zambrano.
That could lead to the state waiving the overpayment or asking you to pay less back, Zambrano says.
If You Choose to File an Appeal
If you don’t have all of your pertinent paycheck information, you’ll want to contact your former boss or human resources department, says Alex Pisani, chief legal officer for Engage PEO, a professional employer organization based in Fort Lauderdale, Florida.
“Employers should provide any information requested by the state, including wage information, dates of employment and whether the individual is still employed in a full-time or part-time capacity,” Pisani says. “The employer should also note if there have been any changes to the employee’s schedule or hours worked, which may affect the employee’s wages during a specific time frame.”
If you have a letter stating that you were overpaid for unemployment benefits, you should carefully review weekly earnings that you received and compare the earnings to the amounts you reported to the state for the same pay periods, Pisani says.
If the fault lies with you, as noted earlier, you can appeal on the grounds of financial hardship. If you’ve done the comparisons and are stunned because your state erred, you need to act fast.
“If work and earnings were correctly reported, the employee has a limited time frame from date of the notice to file a written appeal with the state,” Pisani says. “If the employee doesn’t timely appeal, the determination becomes final, and the amount owed may be subject to garnishment or a civil court judgment if left unpaid.”
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Keeping Track of Unemployment Benefits
Especially if you’re receiving unemployment benefits now, it wouldn’t hurt to keep careful records of the amounts you receive. You’ll need to have those numbers handy when you do your taxes. It’s also a good idea to keep tabs on the revenue you’re bringing in — and what you’re spending.
It’s a bad idea to ignore the problem. If your state asks you to repay unemployment benefits that you can’t pay back, contacting the unemployment office should be at the top of your to-do list.
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Do You Have to Pay Back Unemployment Benefits? originally appeared on usnews.com
Update 11/13/24: This story was published at an earlier date and has been updated with new information.
