Preparing your taxes can be a maddening exercise of frustration. There is a lot that goes into getting your taxes ready. Hence, we recommend using Credit Karma Tax to get all things done tax related.
Traditionally getting taxes ready is time consuming. Gathering receipts from the past year, assembling tax return forms, and knowing the tax law can be a big headache.
Nowadays, online tax tools can take the burden off of knowing it all. With so many options out there, knowing which one to choose is important.
Credit Karma Tax is one of the newer tools that may fit your tax needs. Continue reading to assess if it is a good fit for you.
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About Credit Karma Tax
If the name “Credit Karma Tax” sounds familiar, you might recognize the product’s association with the Credit Karma personal finance-focused website.
This popular online portal offers access to free Equifax and Transunion credit reports. Consumers can also access their credit scores through the Credit Karma website.
The related Credit Karma Tax preparation service is another free financial services product.
This tax-filing software program enables you to prepare (and file) your federal and state tax returns online at no charge.
Credit Karma Tax software is compatible with most major IRS schedules and forms. The Credit Karma Tax website features user-friendly navigation tools to simplify the tax-filing process.
Credit Karma Tax acts like a human tax preparer, asking questions and prompting you to enter answers by clicking a button or entering relevant data. The program automatically records your answers on the correct forms and schedules.
Credit Karma Tax also performs any necessary calculations and updates the applicable forms.
During the tax-preparation process, you may have questions about some aspect of your return. Credit Karma Tax provides answers via a series of articles in its “Help” section.
After you have entered the information for your federal tax return, the program automatically copies the relevant data to your state tax return.
Credit Karma Tax determines whether filing a state return is necessary.
History of Credit Karma Tax
Credit Karma Tax is an offshoot of the Credit Karma personal finance website, which made its debut in 2007.
Each week, Credit Karma provides members with free credit scores and related reports. Credit Karma also provides details on contributing factors to those scores.
Most importantly, Credit Karma regularly monitors members’ credit profiles for suspicious activity. Members will receive notification of “red flag” issues that merit immediate attention.
In 2021, Credit Karma boasts over 100 million members. The company’s value has been estimated to be as high as $4 billion.
Launch of Credit Karma Tax
Credit Karma unveiled its Credit Karma Tax service in 2016. During the 2017 tax season, the free tax software reportedly handled over 1,000,000 tax returns.
To access the Credit Karma Tax program, you must first obtain a Credit Karma account. Although this may sound like an unusual prerequisite, the free tax-filing program functions under the Credit Karma umbrella.
Within that context, the requirement makes sense.
Who Should Use Credit Karma Tax?
The free tax-preparation program may be a good fit for three types of taxpayers.
First, this online program may benefit young earners with few income sources and simple tax scenarios.
Next, Credit Karma Tax may be appropriate for budget-conscious taxpayers with simple tax situations. These individuals likely want to avoid the expense of TurboTax or other tax-filing programs.
Taxpayers with employment income and other earnings may also find this program useful. This free tax-preparation program can accommodate income from rental properties, self-employment, stocks, and dividends.
Taxpayers with more complicated tax returns may find some competing products more appropriate. These products may offer features, and process tax forms, that Credit Karma Tax does not support.
You can check out Credit Karma Tax online tool to assess if it is the right tool for you for free.
Is Credit Karma Tax Free to Use?
As a small businessperson, you are accustomed to paying for products and services that will be used in your business. Given that, you might wonder how they can afford to provide its tax preparation services for free.
Technically, yes, the services are free. However, be aware that they analyzes your proprietary tax data and sends you a steady stream of targeted product information. In today’s world, this is common to receive adds for just about anything you look at.
If you purchase something from one of these businesses, Credit Karma receives a commission from that sale.
Essentially, Credit Karma Tax operates just like Credit Karma, its parent company. That business analyzes your credit report data and periodically sends loan and other financial product recommendations to your Inbox.
Paid Tax Preparation Options
If you find your taxes are cumbersome, several paid tax preparation options are worth consideration. If you are comfortable using computer applications, another online tax preparation software program may meet your needs. In-person tax preparation services are also available in almost every city or town.
If your budget allows for top-tier tax preparation services, consider hiring a Certified Public Accountant. These knowledgeable professionals have proven credentials and wide-ranging tax knowledge, and they are likely familiar with small business tax issues.
How Does Credit Karma Tax Work?
To use the service, sign up for a Credit Karma membership. Next, click on the “File Your Taxes Now” link. Verify your identity by answering some questions about credit report items.
Next, proceed to the Credit Karma Tax website. Provide some preliminary data about your filing status and income. This information enables the tax program to provide you with the correct tax-filing experience.
Progress through the tax return’s homepage topics and subtopics. Answer a series of questions about your W-2 income, self-employment income, tax deductions and tax credits, and other factors that determine your tax outcome.
You must complete each required field before moving forward, so as to ensure you have all your documentation at hand.
After each section, the tool reviews your answers. If the program detects errors or omissions, you will be directed back to the right screen(s) to correct them.
For its part, Credit Karma Tax guarantees the accuracy of its calculations.
After you have finished the return, they allow you to e-file it for free via Credit Karma. If you prefer, you can print and mail the completed tax forms to the IRS.
Frequently Asked Questions
When considering any business service provider, you will likely have specific questions about some aspect of the product or service offering. Here are four commonly asked questions (and answers) about the Credit Karma Tax online tax preparation program.
What About Support For Joint Filing?
Yes, it’s easy to file a single or joint return through Credit Karma Tax. The program supports every federally recognized filing status:
- Married Filing Jointly
- Married Filing Separately
- Qualifying Widow(er) with Dependent Child
- Head of Household
If I’m Self-employed or Own a Small Business, Will Credit Karma Tax Work for Me?
Credit Karma Tax supports the forms filed by an individual to report small business or other partnership income or loss. The forms include:
- Form 1040 schedule C (for a sole proprietorship)
- The Form 1040 schedule E (for partnerships, estates, trusts, multi-member LLCs, S corporations, and C corporations)
- Form 1040 schedule SE (self-employment tax)
Credit Karma Tax does not currently support businesses that are required to file small business forms. Companies that file as a C corporation, an S corporation, a partnership, or a multi-member LLC are not currently supported.
If I am not a United States Resident, Can I Use Credit Karma Tax?
Services are offered to United States residents aged 18 or older. This includes resident aliens who file a Form 1040. They do not offer support for non-resident aliens who file a Form 1040NR.
What about Security Procedures for My Data?
Yes, Credit Karma Tax utilizes several data security procedures. The company is an authorized IRS e-file service provider, so the business must comply with IRS-dictated security standards.
- 128-bit or higher data encryption to protect data during transmission
- Several law-compliant methods to safeguard your tax information
- Two-factor authentication via the Google Authenticator app
- User phone number and SMS or voice verification required
- Onsite operations security team
Compare Credit Karma Tax to These Options
Maybe you want to compare Credit Karma Tax against other online tax preparation software. Although most programs assess a fee, you might find a free federal filing option for taxpayers with super-simple tax returns.
Get more details on several options for filing your taxes online. Then, make the best choice for your business’ needs.
IRS Free File
If you comply with certain income requirements, the Internal Revenue Service (or IRS) permits you to e-file your taxes at no charge. The IRS estimates that up to 70% of the United States population would qualify for this cost-saving move.
To take advantage of this free filing option, however, you would likely have to partner with an online tax preparation solution like FreeTaxUSA. You must also file your state return, which some tax preparation services rarely do for free.
You have probably heard of TurboTax, which is the leading tax preparation software program. TurboTax is under the Intuit umbrella, which means it integrates seamlessly with the Company’s QuickBooks accounting software.
The TurboTax program also meshes well with the Mint financial software.
TurboTax allows you to file a basic federal tax return at no charge. However, filing even a relatively simple return will likely cost $40 or more. If you are self-employed, expect to pay up to $90.
H&R Block, the national tax preparation company with offices in many cities and towns, also offers an online tax filing service. If you have a simple, uncomplicated tax situation, you may qualify for a free federal return.
If you do not meet that requirement, you will likely pay between $29.99 and $84.99 to file a federal return. Expect to pay $36.99 to file your state tax return.
Like other online tax preparation programs, Tax Act also offers a free federal return for simple tax situations. Beyond that, the company’s services cost up to $64.95, depending on your specific requirements. State tax preparation costs range from $4.95 to $44.95.
This Georgia-based business’ online tax preparation program has similarities to the TurboTax and H&R Block tax prep software. However, TaxSlayer is much easier on the pocketbook, as it offers paid options in the $17 to $47 range.
TaxSlayer also offers a free version containing a state tax return form. The company markets this version to college students and those with simple tax returns.
Hire a Certified Public Accountant
Maybe you would rather not file your taxes online, or you think your return may have some unusual circumstances. In this case, hiring a Certified Public Accountant to prepare your return may make sense.
Hiring an experienced accountant will cost more than filing your taxes with an online tax preparation program.
However, your return will be prepared by a skilled professional with wide-ranging knowledge of varied tax situations and their implications.
In other words, it may be worth the money you spend.
Filing taxes is never fun. Making sure they are done right is critical to ensure you get the best return for your business.
The convenient (and free) Credit Karma Tax software enables you to easily file your federal and state tax returns online.
This relatively new service supports most frequently used tax returns. Plus, Credit Karma Tax even includes certain forms for which competitors charge a fee.
Go to Credit Karma Tax to learn more.