Has it really been five years since Credit Karma started Credit Karma Tax? Credit Karma tax is a free-ish way to file your taxes for free. While Credit Karma tax started out with some bumps it is now old enough to have chased out a lot of the bugs. And, it is time to update our Credit Karma tax review.
Credit Karma Tax Review
CreditKarma.com offers a free tax return service, so it’s time for a Credit Karma tax review.
The Credit Karma tax scam concerns are pretty much the same as with the original Credit Karma. You are handing over a lot of personal and financial data. The company has been around long enough to have earned some trust, but concerns about all online financial offerings are real. One main difference between Credit Karma and TurboTax, or other offerings, is that you cannot buy and download an offline version. You will fill out all tax forms online and the hidden Credit Karma tax calculator will perform all the calculations online, behind the scenes.
Initial Credit Karma tax reviews are mixed, so let’s take a look. (Make sure you are not on CreditCarma, KreditKarma, or any other variations which have been reported as scams.)
First and foremost, you must sign up for Credit Karma in order to use the free tax filing software option. If you don’t like this, then you’ll need to do your taxes somewhere else. This is also how the Credit Karma free taxes offering makes its money. It is basically, a way to entice people to join and use the traditional Credit Karma system.
The main Credit Karma shows you ads and offers to get credit cards and loans. They also send out periodic emails reminding you to come back and check your free credit score, and market credit cards that you “may qualify for.”
Credit Karma Tax Complaints and Concerns
It looks like Credit Karma is ready for some complaints and concerns about its free tax service. The front page attempts to answer some basic questions common to typical free tax filing scams. For example, it calls its service “Truly free tax returns,” and says there are no upsells, no hidden fees, and that it is free for everyone. This is because many so-called free tax offers end up doing one of those things. So far, there should be no Credit Karma tax complaints about any of that.
For example, the original business model for TurboTax online was to let you fill out your return for free, but then charge you to file your return, or to print it. This, of course, means it isn’t free at all, since doing your taxes, but neither filing nor printing them, is inherently useless. This year, TurboTax says, Free to File and Free to Start. Notice what’s missing?
But, this isn’t a CreditKarma tax vs TurboTax review, this is just a Credit Karma tax return review.
The main CreditKarma tax complaint, that I hear, revolves around giving them so much information. In particular, some people don’t like having to give out a phone number. I suppose, if you are willing to hand over your address, your Social Security number, and all your bank information, but NOT your phone number, then this isn’t for you. It seems an odd place to draw the line, but always stick with what you are comfortable with.
So, let’s start with what we can find in bold before we search the fine print. First, it says that you get free federal and state e-filing. It says that they won’t charge any fees on your refund (if you get one). This was an older trick to get people to file for free, and then require that they get their refund on a debit card, or into a certain account, often with a fee. Faster, or rapid, refunds often still have fees, because they are actually loans with your refund as collateral. It doesn’t appear that Credit Karma offers a rapid refund type service.
Who Can Use Credit Karma Tax For Free?
Often times, free tax offerings are limited to the very basic kinds of tax returns. This was another trick of TurboTax, TaxCut, and the like. If you were filling out a 1040-EZ, then your taxes were totally free. Of course, filling out a 1040-EZ takes about 10 minutes and isn’t at all complicated, so it wasn’t worth much. According to Credit Karma they support a pretty wide range of tax returns, so let’s start with what forms Credit Karma does not support when using Credit Karma taxes.
You cannot do your taxes on CreditKarma if you:
- Need to do multi-state or part-year state filing — This should only really matter if you moved or happen to split time between two states. This is much more common in the Northeast where the states are pretty small and someone can realistically work/live across state lines.
- Need to report Foreign Income – This can get tricky fast, so I don’t blame them here.
- Need to file Married Filing Separately, in community property states. – I can’t claim to have any knowledge about what the deal is with this, but if it sounds like you, don’t use Credit Karma tax to do your taxes.
- You’re also out of luck if you need to file a 1040-PR for residing in Puerto Rico.
Credit Karma tax filing says it supports all the basics, plus a lot of the more advanced forms as well. Schedule A, for itemized deduction is a must, and it’s supported. There is also Schedule B and D (interest and dividends, and capital gains). Forms for Child Care, HSA accounts, and all of the other “usual” IRS forms I could think of were supported as well.
I pulled up my taxes from last year, and while my return isn’t super complicated, I am usually forced to buy higher-end versions of tax software to complete my taxes. I did find that Credit Karma says it supports all of the Forms I used to file my taxes last year.
Can Small Business Owners or Self-Employed Use Credit Karma?
As a small business owner, no Credit Karma tax review is complete without knowing if I can even use it. This is where most free tax offerings bail out. As a self-employed, freelance writer, with an LLC, I’ve never been able to use a free tax service. In fact, I actually have to buy the more expensive versions to do my taxes, mostly because I use the home office tax deduction.
Credit Karma tax says you can file as self-employed or as a single member LLC. It specifically states that it will do a Schedule C, a Schedule E and a Schedule SE. Dig a little deeper and it does support Form 8829, which is the Home Office tax deduction form, as well as other small business tax forms.
However, you cannot use Credit Karma free tax filings if you need forms used for an S corp, a C corp, partnerships, or multi-member LLC. That means, it’s basically self-employed (just you, and possibly a spouse) only.
What Is the Catch for Using Credit Karma Tax?
So, what’s the catch with CreditKarma tax? The free Credit Karma tax catch is that when you sign up, you agree to let them use the information from preparing your taxes for the rest of their business as well, which is referring you to lenders via targeted offers and ads.
It isn’t really a catch so much, as you have to remember what the company is, and how Credit Karma makes its money. All of CreditKarma.com revenue comes from ads and referrals to lenders. Credit Karma offers you a free credit score so it can pull your credit report. Once it has your credit report, it can use that information to match you with lenders.
For example, if you have crummy credit, it can offer you cards for bad credit. Alternatively, if you have great credit, it can offer you harder to qualify for cards with better rewards.
There are, however, things missing from your credit report. Your income is the biggest one, and it’s also very important to lenders. Also, your credit report shows what your mortgage balance is, and then your mortgage interest tax deduction provides and easy way to calculate the interest rate, so they know what kind of refinancing to offer to you. If you do have a small business, your Schedule C lets Credit Karma know to offer you business credit cards. The amount of revenue and expenses on that Schedule C gives them an idea of which business credit card to offer, and so on.
Using Credit Karma Tax Filing Software
The online Credit Karma tax works pretty much the same as they all do. It starts by asking you questions. Are you married? Do you have kids? Did you do this, or that during 2020, and so on.
As with all tax preparation software, the trick comes when you aren’t really sure about something. Does selling things on the side at eBay count as a small business? Does a new adding machine count as an office supply, or as office equipment, and so on. Theoretically, there are various help options from Credit Karma and everyone else to help answer some of these questions. If you are or are not comfortable using TurboTax, the same probably applies to Credit Karma’s taxes service too.
Once you’ve answered the questions, you start filling in numbers from the various tax forms you have W2, 1099, and so on. Credit Karma does all the math and fills out the forms as it goes. When you are finished you can e-File directly with the IRS, and your state.
You can also print your taxes. I highly encourage you to print your taxes when you e-File them. Keep the paper copy of your taxes for three years. A good high-quality scan is just fine too.
With an online tax service like this, you don’t want to depend on them to keep your data. (This is true for any online tax service.)
Importing TurboTax Into Credit Karma
Credit Karma tax, like most tax software, including TurboTax, TaxCut, H&R Block, and Tax Slayer, will import your previous year tax data from other software, Credit Karma taxes does import from other services, so you don’t have to enter everything manually.
This is particularly useful for things that are carried over from year to year, but not such a big deal if you have a simple return. Still, it is important to note for this CreditKarma tax review.
Other Free Tax Filing Services
Keep in mind that if you have a simple return, and make less than $64,000, you can already use the IRS own Free File Software. Yes, you have to give them all your financial information too, but let’s face it, they already have it anyway.