EDD requirements when starting business while on unemployment - income reporting confusion

You absolutely need to report all income when you certify, even if it's going back into your business. EDD looks at your gross earnings before expenses during the week you performed the work, not when you get paid. This is a common misunderstanding that gets people in trouble. You should talk to EDD directly about your specific situation, but the rule of thumb is: if you're working, you report the hours and income earned, regardless of business expenses.

im in the same boat started my lawn care biz while on ui last year. the way i handled it is i reported the profit after expenses not the total revenue. Like if i made $200 but spent $150 on gas equipment etc id report $50. never had any issues. EDD is mostly concerned with what ur actually putting in ur pocket not business expenses

I went through this exact situation in 2023. Per EDD guidelines, you must report all income when you certify, but there's an important distinction here. For self-employment, you report NET income (after business expenses), not gross revenue. This is different from W-2 employment where you report gross wages. When you certify, there's a question specifically asking if you were self-employed. Answer 'yes' and report your NET earnings for that week. If your business expenses exceeded revenue that week, your net income is zero, so you'd report zero income. But you still must report the hours worked. I recommend keeping meticulous records of all business transactions, expenses, and revenue. Create a simple weekly profit/loss statement to calculate your net income for certification purposes. This documentation will protect you if EDD ever audits your claim.

The whole EDD system is DESIGNED to trap people who are trying to be entrepreneurial!! I started a small online shop last year while on unemployment and got SLAMMED with an overpayment notice 8 months later claiming I didn't report properly. They wanted $7,400 back!!!! Even though I barely made enough to cover my materials and shipping costs. The system is rigged against small business owners trying to get back on their feet. It's absolutely INSANE.

I've been trying to get through to an EDD representative for a week now to ask this EXACT question. Always get the "we're experiencing high call volume" message and then it hangs up on me. So frustrating when you're actually trying to follow the rules but can't get answers!! I finally found a service called Claimyr that helped me get through to an EDD rep without the endless redial game. They have a video showing how it works here: https://youtu.be/JmuwXR7HA10?si=TSwYbu_GOwYzt9km The agent I spoke with confirmed what others have said - for self-employment, you report NET income after business expenses on your certification. But you still have to report all hours worked on your business even if you didn't make any money that week. They said keeping detailed records of all expenses and income is super important in case of an audit.

just want to add my experience - i started a photography business while on unemployment and was totally confused about how to report it too. ended up calling edd (took 3 days of trying) and they told me to report net income, not gross. but critically important: if u work more than 32 hours in a week on ur business, ur not eligible for benefits that week even if u made zero dollars!!! they consider that full time self employment. ask me how i learned that one the hard way lol

Make sure you keep track of all your business expenses and income separately from personal finances. Get a separate business bank account ASAP if you don't already have one. My cousin got audited by EDD and they wanted documentation for every single transaction to prove what was business vs personal.

I want to provide a bit more clarity here since there's been some confusion in the thread. The distinction between reporting GROSS vs NET income depends on your business structure: 1. If you're operating as a sole proprietor/self-employed: You report NET income (after business expenses) 2. If you've formed an S-Corp and pay yourself a salary: You report GROSS wages as employment income 3. Independent contractor work (gig work): This is typically reported as NET income The key is how you'll be filing your taxes. If your business income will be reported on Schedule C, then you generally report net income to EDD. But regardless of income, if you work more than 32 hours in a week on your business, you'll be considered fully employed for that week. I recommend reviewing the DE 8714U form on the EDD website which explains self-employment reporting requirements in detail.

one more thing nobody mentioned - dont forget that u need to be looking for regular employment while on ui even if ur starting a business. u still gotta do the work search requirements and be ready to take a job if offered one. thats tripped up some people i know

I've been in a similar situation and want to emphasize something that helped me avoid issues: document EVERYTHING from day one. I created a simple spreadsheet tracking daily hours worked, all income received, and every business expense with receipts. When EDD eventually asked for documentation during a routine review, I had everything organized by week which made the process much smoother. Also, be very careful about the 32-hour rule mentioned above. I learned to track my business hours just like I would track work hours at a regular job. Some weeks I had to deliberately scale back my business activities to stay under 32 hours so I could remain eligible for benefits. It's a delicate balance but totally doable if you're strategic about it. One tip: consider batching your business work. Instead of working a little each day, maybe work intensively 2-3 days per week and use the other days for job searching and personal time. This can help you stay productive on your business while keeping your weekly hours manageable for EDD purposes.

I'm dealing with almost the exact same situation right now! Started a freelance web development business while on unemployment after getting laid off from my marketing job. The conflicting advice online is so confusing - some sources say gross income, others say net income. Reading through all these responses, it sounds like the consensus is that for sole proprietors we report NET income after business expenses, but we absolutely must track and report ALL hours worked even if we made zero profit that week. The 32-hour rule is something I definitely need to be more careful about. @Nadia Zaldivar your batching strategy is brilliant! I've been working scattered hours throughout the week and probably going over 32 hours regularly without even realizing it. Going to try restructuring my schedule to do intensive work sessions 2-3 days per week instead. Has anyone had experience with EDD asking for documentation during their reviews? I'm wondering what level of detail they typically want to see in terms of expense records and time tracking.

Just want to echo what others have said about keeping meticulous records - this saved me during an EDD audit last year. I'd also recommend setting up a simple time tracking app on your phone specifically for business hours. I use Toggl (free version) to track exactly when I start and stop working on my consulting business each day. One thing I haven't seen mentioned yet: be super careful about how you answer the certification questions. When it asks "Did you work or earn any money?" - if you worked ANY hours on your business that week, the answer is YES, even if your net income was zero or negative. Then in the follow-up questions, you report your net income and total hours worked. The biggest mistake I see people make is answering "No" to the work question just because they didn't make money that week. EDD considers any time spent on business development, marketing, client meetings, etc. as "work" regardless of whether it generated immediate income. Better to be overly transparent than risk getting flagged for misreporting.

I'm a tax professional who works with a lot of EDD clients, and I want to add some additional context that might help everyone here. The confusion around gross vs net reporting often stems from the fact that EDD's online system and phone representatives don't always give consistent guidance, which is incredibly frustrating. Here's what I tell my clients: For sole proprietors and single-member LLCs (taxed as sole proprietors), you should report NET income after legitimate business expenses. However, the key word is "legitimate" - EDD may scrutinize expenses that seem personal in nature or unreasonable for your type of business. I also strongly recommend getting everything in writing when you speak with EDD reps. Email them after your call summarizing what they told you and ask for written confirmation. This creates a paper trail that can protect you if there's a dispute later. One more critical point: if you're claiming unemployment while starting a business, consider consulting with a tax professional early on. The intersection of unemployment benefits, self-employment tax, and business deductions can get complex quickly, and it's much cheaper to get advice upfront than to deal with audit issues later. Many of us offer initial consultations specifically for people in this situation.

I went through this exact situation about 6 months ago when I started my marketing consultancy while collecting UI benefits. The anxiety about getting it wrong is real, but here's what worked for me: 1. I set up a dedicated business checking account immediately to keep everything separate 2. Used a simple Google Sheet to track DAILY: hours worked, tasks performed, income received, and expenses paid 3. Always reported NET income (revenue minus expenses) on my bi-weekly certifications 4. Was super careful about the 32-hour rule - I actually set a phone alarm for Sundays to calculate my weekly hours The game-changer was treating my business hours like a part-time job with set "shifts." I worked Tuesday/Wednesday/Thursday from 9-5 on client work and business development, then dedicated Monday/Friday to job searching. This kept me under 32 hours most weeks and made it easier to track everything. One thing I learned the hard way: even unpaid activities count as work hours! Time spent on networking calls, updating your website, or creating proposals all count toward that 32-hour limit. I initially wasn't tracking these "non-billable" hours and was probably going over the limit without realizing it. The good news is that once you establish a good tracking system, it becomes routine. Just be obsessively detailed with your records - it's way better to over-document than under-document if EDD ever comes knocking.