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Many received extra unemployment insurance because of the CARES Act. That money is still taxable.

The Pandemic Unemployment Assistance Program gave an additional $600 a week to eligible claimants financially affected by COVID-19.

DES MOINES, Iowa — Unemployment insurance is a vital safety net for those eligible to get it---

The CARES Act provided extra money to people who lost their job because of COVID-19. 

A Local 5 viewer wanted to know if the additional unemployment benefits they received affects them come tax day 2021.

A key program created in the act was Federal Pandemic Unemployment Compensation.

It temporarily gave an additional $600 a week, on top of existing unemployment benefits, for those out of work because of the pandemic.

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The federal government funded this so-called "booster shot." That bonus, however, expired at the end of July. 

The extra money, Much like regular unemployment insurance, isn't actually free money.

"They're surprised to discover that they are indeed taxable when they go to file their tax return," Nathan Rigney of H&R Block said. "That additional sort of bonus unemployment, and it really added up for folks."

"I know $500-$600 extra per week. That is taxable, as well."

The IRS notes unemployment compensation is taxable and must be reported on a 2020 federal income tax return.

But withholding is voluntary.

Rigney said though you must think very carefully.

"So if you didn't elect withholding from that, it could end up that you have a pretty big tax bill at the end of the year," he said.

Rigney said if you don't take out enough tax, the IRS will ding you, just a little bit.

"Now if you're significantly under withheld for the year, you could have a small penalty for underpayment or under withholding throughout the year but it's usually a pretty small penalty," he said. "If you can manage the cash flow, you're much better off to elect withholding when you receive those benefits."

The IRS is willing to work with you, with payment plans.

"They're low, very low interest there. If you're lower income, you can even waive the application fee," Rigney said. 

Iowa Workforce Development said you have the choice to withhold 10% of your weekly benefit payment for federal taxes, or 5% for Iowa taxes.

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