The only thing better than free is free and good. When it comes to tax software, Credit Karma Tax delivers on both accounts. In it’s introductory year, Credit Karma delivered big on their promise to make tax filing simple and free.
Here’s what you need to know about CreditKarma Tax Filing.
** As a side note, there's still a waitlist to get started on it (as of 1/20/17). If you're curious to try it out, make sure you get on the waitlist ASAP: Credit Karma Tax Waitlist.
Is Credit Karma Tax Really Free?
When tax software companies advertises as free, it’s good to be suspicious. After all, free usually doesn’t mean free. However, you will not pay out of pocket to use Credit Karma’s Tax software.
That doesn’t mean that Credit Karma’s software isn’t without cost to you. When you file your taxes with Credit Karma, you agree to let them use your information. They will use your information to refine their credit card offer algorithm. If you sign up for a credit card from Credit Karma, they will get a commission.
It’s not a high price to pay. As a long time Credit Karma user, I find their offerings respectful (if a little off base). However, I do find it a bit annoying that you have to get your credit score while signing up to do your taxes - it's just a weird mix/vibe.
If you’re worried about advertisements within the tax software, don’t worry. Credit Karma kept their tax platform free of any offers.
Credit Karma Tax Prep Process
If you’re a current Credit Karma user, Credit Karma will allow you to port your basic information to the tax platform. It won’t save you much time, but every minute counts when it comes to taxes.
One thing you can’t do? You can’t import your tax return from last year. This is a problem if you’re a real estate investor who needs to compare to last year. Most other tax software options (like TurboTax and H&R Block) offer this feature, as it encourages easy switching of tax platforms.
Once you complete your personal information, you can choose interview style or self-guided filing. For testing purposes, I used both methods. The interview method was very easy to understand. It was perfect for beginners and experienced filers alike.
Here's an example of the interview questions:
Anytime you choose “Yes” to a question, Credit Karma guides you through another series of questions. At any point, you can switch to “Tax Form View” to fill out the necessary information without the interruption of questions. That’s a nice touch that other software companies don’t add.
If you choose the self guided option, you can navigate to the relevant sections:
Credit Karma featured an easy to use interface, but it has a few drawbacks. The software doesn’t have any import options. This opens up the option of user error, especially for stock and bond traders.
Likewise, real estate investors and small business owners need to be careful with their depreciation and amortization schedules.
Finally, Credit Karma doesn't allow multiple state filings yet. That's a bummer... maybe next year. So, if you have to file in more than one state, you can't use Credit Karma.
What If I Get Confused?
If you get confused while prepping your taxes, Credit Karma has a few options. First, you can hover over the gray question marks. These question marks help explain more difficult terminology. More complex questions have outbound links to the IRS website. Unless you’re excited to study tax law, the IRS website isn’t helpful.
However, with a little digging, I found that Credit Karma has several very helpful knowledge articles. To access them, scroll to the bottom of the website, and click “Tax Help Center.”
In addition to articles, you can request email tax and tech support. The average turnaround time for questions is about 3 days.
Overall, the Credit Karma user interface and experience won me over. But, it’s not a great tool for every circumstance. Unfortunately, most real estate investors will need to pay for a great tool like TurboTax or H&R Block unless they feel very comfortable with tax rules.
Frequent traders won’t like the clumsy interface for entering trades. They would likewise be better served to choose a paid option.
Outside of those two groups, most people will see incredible value from Credit Karma Tax. Credit Karma makes it easy to find deductions and credits without forcing you to upgrade. If you earned just a little bit of cash on the side, you don’t have to pay through the nose to declare it.
I expect that in the coming years, Credit Karma will grow their base of knowledge articles and maybe even improve their support. As long as you’re comfortable giving Credit Karma your income information, you’ll benefit from this free software opportunity.