What constitutes “earning income” for unemployment purposes?

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What constitutes “earning income” for unemployment purposes?

My husband is receiving unemployment benefits for a year. The past 4 months he has been contracting work with a business that pays our company (a C-corp.). Our company then pays its bills and loan payments for money we invested in it (the loan is documented). He is not earning an income so we felt this was legal. Now someone has reported my husband as working and collecting unemployment. He is scheduled for an interview to investigate. Can you provide any advice?

Asked on April 3, 2011 under Employment Labor Law, Illinois

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

The definition of "earned income" differs for different purposes.  For example, for tax purposes unemployment compensation is considered earned income and you are taxed on it.  The IRS also defines earned income as working for someone else or in a business that you own.  Although unemployment definitions and the IRS definitions vary, the factors used to determine issues sometimes overlap.  I might think your husband, who is actively doing something to generate income to a business that he is a art of, is earning income.  I would strongly suggest that you seek help from an attorney in your area.  And consider that you may have to start paying his benefits back. Good luck.


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