If you were among the millions of Americans put out of work due to COVID-19 this year, you probably did what many others did: file for unemployment. Of course, for those employed in "regular jobs" who receive W-2 tax forms, this simply took the form of standard Unemployment Insurance. The duration of this varies by state, but it averages out at 26 weeks.

For freelancers and those who work in the "gig" economy or perform other jobs where they file 1099-based tax returns, there was Pandemic Unemployment Assistance. This effectively provided these workers with identical unemployment insurance.

In addition to all of this, there was a period between March and August of 2020 where Congress, through the CARES Act, voted to bump these weekly checks up by $600. Depending on the state you were in, this could have made very little difference or it could have made all the difference in the world. Regardless of this, many claimants are reporting that they're now being asked to pay money back! We'll take a look at which states are asking people to give that money back, what rights you have in this regard, and how you can hold onto that compensation you deserved to get in the first place.
 

The States Requesting Money Back

While most states have sent out notices to those they believe may have committed fraud to obtain benefits unlawfully, there are two that are currently making headlines: Colorado and Missouri.

In Colorado, many lower wage workers are being asked to repay the entire amount they received via the CARES Act. This is largely in the wake of employers realizing their huge increases to unemployment insurance as they open all the way back up and trying to recoup some of it by claiming that employees quit rather than that they were laid off. This disturbing trend is pushing many who were already either right at the poverty line or below it further into debt in the state where many already struggle due to the relatively high cost of living and tax burden.

Missouri, on the other hand, has been mostly moot in with respect to lower wage workers in traditional, W-2 jobs. Instead, they have been targeting those who are perhaps the most vulnerable to COVID-related economic woes: freelancers and small business owners. Rather than targeting those who applied for traditional UI and got supplemental CARES aid, they are targeting those who applied for and were approved for PUA.

The state is effectively claiming that many sole proprietors of small businesses and gig employees couldn't qualify for PUA because they were entities rather than people for the purposes of the application. The state says they were approved in error. It has gotten to the point where many people who own small businesses and have been informed that they'll be legally required to pay the state back are considering a large-scale class action suit against the state.
 

What Do I Do?

If you got one of these letters, the first thing to do is to remember to not panic. Just like the economic recovery as a whole, it isn't as if you will resolve this situation overnight. First, ensure that it is not an error; this can usually be done with a quick call or email to your state's Department of Labor or similarly-titled office.

Once you determine it is not in error, make sure you record the specific details of why the state believes you were overpaid. Make sure to not make any "admissions" that you were overpaid, like agreeing with the operator relaying the information to you, as states typically record these lines. Once you have all of this information, it's time to research online and determine how many others are receiving these notices.

In some states, for example, there's a common process where these can be resolved by filling out a few online forms. Unfortunately, social media like Reddit is typically the best place to find peer-created advice for your specific state rather than the state entities who are ultimately responsible for this advice. In other states, you may legally not have many other options.

If you come to the conclusion you don't have any other options, consider talking to a lawyer (typically available for free via legal aid) about forming a class action suit if there aren't already any that fit your description. If not, you can be the first in creating lasting change for countless others in your situation!