Will 1099 contract work during layoff transition affect my EDD benefits starting February?
Just got hit with news that I'm being laid off from my marketing position (5 years at the company). My last day as a W-2 employee is January 3rd, 2025, but they've thrown me a curveball - offering me a 1099 contract position until January 31st to help transition my projects. The contract would be about 25 hours/week at $42/hour. I'm worried about how this will impact my unemployment benefits. Will accepting this short-term contract make me completely ineligible for EDD? Or will I just not receive benefits during January while I'm doing the contract work, but then qualify starting February 1st when I'm fully unemployed? Need to make a decision quickly as they want an answer by tomorrow. Anyone dealt with this W-2 to 1099 transition situation before? Really anxious about making the wrong choice here.
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Dmitry Ivanov
You won't be completely ineligible. This is actually a pretty common scenario. When you file your initial claim, report that you have limited contract work that will end on January 31st. During January, you'll need to certify and report your 1099 earnings each week, which will likely reduce or eliminate your benefit amount for those weeks depending on how much you earn. Once your contract ends on January 31st, you'll continue certifying but report zero income, and your full unemployment benefits should kick in. Just make sure you accurately report all earnings during certification - EDD is very particular about this.
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StarSailor
•Thank you! That's a huge relief. I was really stressing that accepting this transition contract would somehow mess up my entire claim. Do I need to wait until after January 31st to file my initial claim, or should I file right after my W-2 employment ends on January 3rd?
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Ava Garcia
be VERY CAREFUL about this!!! i had something similar happen in 2023 and EDD considered me self-employed during my contract period and DENIED my claim entirely!! had to go through the whole appeal process and it was a NIGHTMARE. took like 4 months to get it sorted out. make sure ur contarct clearly states its temporary and has an end date!!!
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Miguel Silva
•This advice isn't quite right. The key difference is that OP's contract has a clear end date and is obviously transitional. EDD won't consider them self-employed if the contract is clearly temporary and limited. Self-employment determinations usually happen when people start ongoing freelance work while trying to claim benefits.
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Ava Garcia
•maybe YOUR situation worked out fine but mine didnt! just telling my experience so they can be careful
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Zainab Ismail
You should file your claim right away on January 4th (the day after your W2 employment ends). Don't wait until after the contract period. Your base period qualifying wages will be based on your W2 employment, and you'll just report the 1099 income during your weekly certifications. Make sure you answer "yes" to the question about whether you worked each week during your contract period, and report your gross earnings (before taxes) for each week. The EDD system will calculate if you're eligible for partial benefits. With $42/hour for 25 hours, you'll likely exceed the threshold for weekly benefits during January.
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StarSailor
•This makes a lot of sense - thanks for the clear explanation! One follow-up: do I need any special documentation about the contract to submit with my application, or just report the earnings during certification?
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Zainab Ismail
•You don't need to submit documentation with your initial application, but keep copies of everything (your layoff notice, the contract, and all invoices/payments) in case EDD requests verification later. They sometimes do spot checks, especially with situations involving quick transitions from W2 to 1099 work.
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Connor O'Neill
i had a similar thing happen but my contract was for 3 months after layoff. i filed for unemployment right away and just reported my contract earnings each week. some weeks i got small partial payments when i didnt work much, other weeks got nothing when i worked more hours. after contract ended i got full benefits no problem. just make sure u certify EVERY week even if ur pretty sure u wont get paid that week
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QuantumQuester
•Have you had any trouble getting through to EDD on the phone? I'm trying to reach them about a similar situation but it's impossible to get a human on the line.
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Connor O'Neill
•omg its literally impossible!! i tried for like 2 weeks straight and kept getting the "we're experiencing high call volume" message and it would hang up!!
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QuantumQuester
If anyone's having trouble reaching EDD on the phone (like me), I finally got through using Claimyr. It's a service that basically calls EDD for you and gets you in the call queue. Costs a bit but saved me days of frustration. Their site is claimyr.com and they have a video showing how it works: https://youtu.be/JmuwXR7HA10?si=TSwYbu_GOwYzt9km I was skeptical but it worked when I needed to clarify my partial employment situation. The EDD rep I spoke with confirmed exactly what others have said here - file right away, report contract earnings weekly, and you'll get full benefits once the contract ends.
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Yara Nassar
•did this actually work? seems sketchy to use a third party service
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QuantumQuester
•It did work for me - got through in about 25 minutes after trying on my own for days. The service just gets you in the phone queue, then you talk directly to EDD yourself. Made a huge difference when I needed clarification about my claim.
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Miguel Silva
To add a bit more technical detail to what others have said: The key EDD concept here is "partial unemployment." When you certify each week during January, you'll report your hourly contract work. EDD uses a formula where they disregard the first $25 or 25% of your earnings (whichever is greater), then subtract the remainder from your weekly benefit amount. With your hourly rate and hours, you'll likely exceed the threshold for benefits during those weeks. But this ONLY affects those specific weeks - not your overall claim eligibility. As long as you meet the base period earnings requirements from your previous W2 employment, maintaining a valid claim is just a matter of proper certification. Make sure you indicate the work is temporary when you first file.
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StarSailor
•This is incredibly helpful - thank you for explaining the partial unemployment formula! I didn't realize there was a small earnings disregard. Sounds like I should definitely take the transition contract since it won't hurt my long-term benefits.
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Miguel Silva
•Exactly. Taking the contract gives you additional income in January without hurting your overall claim. Just make sure when you file that you clearly indicate your regular employment ended due to layoff, and this contract is temporary with a specific end date. That distinction is important for your claim.
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Yara Nassar
wait so do u apply before or after the contract? im confused
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Zainab Ismail
•Apply immediately after your regular W2 employment ends (so on January 4th in OP's case). Don't wait until after the contract ends. The contract work just gets reported during your weekly certifications.
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StarSailor
Thank you everyone for all the helpful advice! I'm going to accept the contract since it seems like it won't affect my overall claim - just the January weeks. I'll file my initial claim right after my W2 employment ends on January 3rd, make sure I'm clear about the temporary contract situation, and then certify and report all earnings properly. Will definitely keep all documentation just in case EDD has questions later. Really appreciate all the insights - this community is amazing!
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