Unemployed about to owe taxes on benefits, need to start looking for work

“If you haven’t heard, you will be hearing about folks who are really distraught,” Assistant Secretary for Employment Security Pryor Gibson told state lawmakers during a legislative oversight committee hearing.

When people sign up for unemployment, they can check a box to have the state withhold income taxes for them or another box to decline. Those who declined may find they owe money to the IRS when they file their income taxes.

Gibson said the pandemic has gone on so long that some people have probably forgotten.

About 332,300 people are getting unemployment benefits right now in the state, mostly paid out of federal programs Congress approved or extended over the last year. At one point or another over the last 12 months, more than 1.4 million people have filed for unemployment in the state.

Many of those out of work will have to look for jobs again, starting now, to keep getting benefits. The weekly work search requirement was waived for most of the pandemic, but it went back into effect this week for people filing new claims.

That includes people who are newly unemployed as well as anyone who's been unemployed for an entire year. That's because the state's "benefit year" resets after 365 days, requiring people to file a new claim.

The state's unemployment system will prompt people affected by this to file that new claim, according to the Division of Employment Security.

The work search requirement generally requires people to make three contacts a week with potential employers, and claimants are supposed to document those contacts in case the state asks for backup information.

Sen. Chuck Edwards, R-Henderson, who co-chairs a joint House-Senate oversight committee on unemployment issues, said he was concerned Wednesday by reports from some employers that people show up saying, "I don’t want a job, I just want you to say that I applied for one.”

Gibson said that's a "frustration we can appreciate."

His chief deputy, Antwon Keith, told lawmakers that the agency tends to give people "the benefit of the doubt" on work search, but claimants should keep written records because "you never know when that audit will come."

Edwards said he's also heard from employers that they're having trouble filling open jobs.

This is a tension lawmakers face as they consider long-term changes to the state's unemployment benefits, which are some of the stingiest in the nation. Democrats filed legislation in both the House and the Senate this week to boost what the state pays and how long it pays unemployment claims.

Unemployment typically pays about half a person's salary, with a current cap of $350 a week. That would increase to $500 under Senate Bill 320. The state system pays benefits for a maximum of 12 to 16 weeks, depending on the state's unemployment rate, but the bill would boost that to 26 weeks.

Gov. Roy Cooper has endorsed the changes, but there's been no indication so far this legislative session that Republican lawmakers in the majority will move on the issue.

Federal programs cover most of the benefits paid out now in North Carolina via programs that expire Sept. 6. At that point, details of the state's regular unemployment system will become more important.

The state also ranks low in recipiency, a measurement of how many unemployed people qualify for any benefits. The U.S. Department of Labor put North Carolina last among the 50 states in that measurement in 2019, the last year before the pandemic.

North Carolina was also near the bottom for 2020, coming in just ahead of South Dakota.

The GOP majority in the state Senate backed an increase in state unemployment benefits last year, but it would have been a temporary response to the pandemic. The House declined to go along.

Rep. Julia Howard, R-Davie, a key negotiator on these issues, didn't immediately respond to messages Wednesday asking whether increases stand a chance in this year's General Assembly.

So far, Republicans have advanced legislation to tweak the existing system and to keep the tax that employers pay to finance benefits from increasing, a change Cooper has called for as well.

The trust fund the covers state benefits is healthy, totaling more than $2.6 billion.

Advocates calling for a benefits increase held a virtual press conference Wednesday to make their case, saying current levels are embarrassing.

“For too long, North Carolina has paid too little for too short a time to too few people," said MaryBe McMillan, president of the North Carolina AFL-CIO, a labor group.

Sen. Wiley Nickel, D-Wake, one of several Democratic lawmakers pressing for change, said increases are "about throwing jobless workers a lifeline.”

Nickel distributed information about North Carolina's current benefit rankings to unemployment oversight committee members Wednesday morning. But as the meeting got underway, Howard, a committee co-chair, asked that it be recollected, saying Nickel didn't ask permission to distribute it.