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As a US Citizen living in Mexico, I continue to have Unemployment insurance deducted from my paycheck. Can I actually receive unemployment benefits if I were to lose my job for a covered reason, even though I'm living in another country?

  • Since unemployment benefits in the US are state run you may need to prove loss of job in that state. – Karlson Mar 13 '14 at 0:27
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Yes, and no, depending on the state where you're still technically employed. If you pay into the fund then you are entitled to benefit from it should you need it, but (depending on the state)

  • They probably won't send your benefits abroad, someone in the US will need to receive, endorse and deposit the checks (unless your state allows for direct deposit of benefits)
  • They will want you to show evidence that you're actively seeking employment
  • They may ask you to appear in person for any number of reasons, probably multiple times

Philosophically you should get what you paid into, but the system is not designed to deal with people no longer residing in the state - much less abroad. If you think about it closely, your situation almost pings every fraud check they have in place.

I also continued to pay for this (along with the rest of the standard deductions) for the first six months that I was living abroad. I inquired (with my company HR department) and they suggested just removing me as a regular employee, and setting me up as an outside contractor that received a US 1099 tax form each year.

If you're intent on living outside of the US, then you're also needlessly paying state income tax as well. If you plan to remain there, I'd strongly suggest that you contact your HR department, tell them you'd like to be paid as a contractor instead (which stops all deductions, including federal) and then at the end of the year settle up with whatever you might owe the feds (after taking the expat deduction if it applies to you).

  • Am I correct in assuming that it would at least give you the option to come back to your home state and live there if everything went bad? This could be valuable in itself. – Gala Mar 13 '14 at 10:02
  • @GaëlLaurans Repatriating can get tricky depending on how long you were gone, what you allowed to lapse .. but you can plan ahead. That's actually a decent question in the making, "I plan to be gone for (x) years but eventually return to (place), how can I plan now for a smooth repatriation?" – Tim Post Mar 13 '14 at 15:53

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