What do I do if I had 1099 income while collecting unemployment benefits?
Question Details:
Under complicated circumstances, I accepted a month of work under a 1099 agreement for a pre-revenue start-up company, while collecting unemployment benefits. I desperately needed the money at the time, and was under the impression that the job would continue to evolve into a W2 status, in which case I would have terminated my unemployment claim, so I didn't report the income. I remain unemployed and need the benefits to survive, if not I would immediately inform DUA and arrange to pay back the money. What is the best way to handle the situation?
Employment and Labor Law Answers
There is no good way to handle it. By accepting UI benefits while being employed (albeit as a 1099 contractor rather than a W-2 employee), you committed unemployment fraud (especially since you seem to have been aware at the time that you could not be paid as a contractor while drawing UI). If you "fessed up" quickly, you'd have the best chance of limiting interest or penalties and having this treated as an honest mistake--though you would have to repay the sums. The longer you wait, the more likely you are, if the matter is discovered, to incur interest and penalties; it's always better, when there's a problem, to go forward voluntarily to the government agency rather than wait for them find you. But you would have to repay.
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