Most folks have heard of Credit Karma, the free credit score website. They basically killed off those other free credit score websites by providing a free credit score (and credit report) without the need for your credit card info.
It revolutionized the credit scoring game.
Well, now they want to do the same thing with…your taxes. Sounds strange, doesn’t it, but alas, it’s true.
It appears Credit Karma is now planning to go head-to-head with the likes of Intuit’s TurboTax, a bold move to be sure.
Introducing Credit Karma Tax
Let’s learn more about “Credit Karma Tax,” shall we. In short, Credit Karma is offering to do your taxes for free in return for a better understanding of your financial situation.
In other words, the more they know about your finances, the better they’ll be able to assist you in applying for offers that land them a commission.
Like their credit scoring product, gaining information about you helps them “suggest better credit cards, loans and insurance products.”
Of course, you aren’t obligated to listen to them, and there are times when their suggestions don’t make a lot of sense. I think this is one of the shortcomings of artificial intelligence. There’s probably not an actual human cross-checking these suggestions.
Credit Karma Tax Is 100% Free
Anyway, the Credit Karma Tax product is 100% free, and includes both federal and state taxes, unlike other “free” tax services that charge you for state and provide federal free of charge.
There are no upsells or hidden fees associated with the product, unlike other so-called free tax services out there.
The product is website-based, not a download, so it’s completed like TurboTax where you can save your info and revisit it as you work through it.
You have to be a member of the standard Credit Karma service to do your taxes with them, and if you want them to do your taxes, you have to add your name to a waiting list (not anymore!).
They plan to roll out the service in January 2017 to I suppose the lucky few that are chosen initially. It’s unclear how many slots there are, it might just be a beta type rollout initially.
For the record, you can e-file (Credit Karma is an authorized IRS e-file provider) or print out your taxes and mail them in to the IRS. It’s free either way.
However, not everyone is eligible for this new service, only those with the following tax schedules:
• 1040EZ
• 1040A
• 1040
And those who are self-employed and/or own a small business can use the service, with the following forms supported:
• 1040 schedule C (sole proprietorship)
• 1040 schedule E (partnerships, estates, trusts, multi-member LLCs, S corporations, C corporations)
• 1040 schedule SE (self-employment tax)
But Credit Karma Tax doesn’t support those who need to file small business forms or businesses that file as an S-corp, C-corp, partnership, or multi-member LLC.
Additionally, Credit Karma Tax does not support the following stuff:
• Multiple state or non-resident state returns
• State filings w/o a federal return
• 1040NR (non-resident federal filing)
• Foreign earned income credit
• Non-dependent earned income credit
• Married filing separately (MFS) in common law states
• Estate and Trust income from K1 forms
But, they do support joint filings, which is a plus. You can see a complete list of forms they support on their website.
Should You Use Credit Karma Tax for Your Taxes?
This is the million-dollar question, and one that will vary based on your unique financial profile.
For those with simple taxes, typically W-2 employees with no major investments or complicated tax structures, a product like Credit Karma Tax would probably work out just fine.
But if you’re self-employed and have lots of investments, real estate, etc., it might not be the best way to go unless you’re also well-versed in tax law.
Of course, if you are the latter person, and you do your own taxes through TurboTax or a similar automated system, Credit Karma’s version will likely be pretty much on par.
They do claim to have some support on the product, but also note that they’re not tax advisors, and as such won’t be able to provide personal or legal tax advice.
There’s a chance products like TurboTax might offer more robust services like audit protection and advanced support features (for a cost).
At the end of the day, it comes down to how much you want to pay (or not pay) to do your taxes and how much privacy means to you.