Nearly 1 million Californians may have to pay back some of their unemployment benefits

ORANGE COUNTY, Calif. (KGO) -- Right before the holidays, thousands of self-employed and gig workers just found out they may have to pay back unemployment benefits they have already received.

It is a crisis, just before the holidays, many have already spent the money on living expenses. Now nearly one million workers were just notified they might have to pay a lot of it back to the government.

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"We're all doing the best we can, and now this?" Lilly Walters of Orange County had a steady face-painting business when the pandemic hit, making it impossible - even unlawful - to do her job.

"There's no way I can paint you, I can't even get within an arm's length of you," Walters said.

Thankfully, the federal CARES Act kicked in back in April with first-ever unemployment benefits for self-employed and gig workers like Walters.

It was a life-saver - but now the government is suddenly asking for a lot of that money back.

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"Well what? What? All these months later? That amount of money could be thousands of dollars," said Walters.

It's money Walters has already spent on food and housing.

"I would have made different choices over the last six months, of not buying steaks. I would've bought hot dogs," she said.

Problems began last April when gig workers and the self-employed first applied for unemployment.

Benefits were supposed to be based on their net income in 2019. But in all the confusion of an unprecedented program, many reported their gross income instead.

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That caused EDD to pay them too much.

Now, it wants the extra money back.

"That could be $13,000 for me. Who knows, right now they just want this to hang over us for Christmas?" Walters asked.

Here's the breakdown:

  • Self-employed workers needed a net income of at least $46,696 to qualify for the maximum benefit of $450 per week.

  • Those with less income get a lesser, prorated amount. The minimum benefit is $167 per week for those with net income of up to $17,368.

  • For employees who earn regular wages, benefits are based on income reported on their W2 forms.


Walters and others said the EDD website had misleading instructions for self-employed workers whose income is reported on 1099 forms.

"Do you want net or gross? Oh, it's right here on the website. Gross? Okay?" Walters wondered.

She pointed to a section on the EDD website asking them to use their gross income to certify for benefits each week.

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The EDD said that's only to determine continuing eligibility each week, not for calculating the benefit.

"It's certainly an understandable mistake,'' EDD spokesperson Loree Levy said in an email.

Still, many reported their gross income, and have been collecting more benefits than the law allows.

Now EDD is offering them a repayment plan -- with interest tacked on!

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"Now they want to give me a loan? I don't want a loan!" said Walters.

On top of having to come up with money, benefits for the self-employed are about to be cut off entirely on the day after Christmas.

Unless Congress acts fast.

"It's heartbreaking. It's heartbreak after heartbreak after heartbreak," Walters said.

The CARES Act makes it illegal for EDD to forgive these overpayments. However, Congress is considering a waiver to let workers keep that extra money if the mistake was honest. It's part of a proposed relief bill if they finally pass one.

Take a look at more stories and videos by Michael Finney and 7 On Your Side.

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