What You Need to Know About Credit Karma Tax

File your return at no cost with this mobile-friendly online service

Couple in Living Room With Man on Bicycle and Woman on Couch Using Smartphone
•••

 Getty Images

It’s not your grandfather’s Internal Revenue Service (IRS) anymore. Gone are the days of pencils and paper tax forms, and scribbling math equations on a notepad. Calculators may not even be necessary at this point. Numerous companies stand by with software and apps that are designed to make tax time as painless as possible. Credit Karma Tax is one of them. 

How to Use Credit Karma Tax

Using Credit Karma Tax is as easy as accessing the website, but you do have to sign up with Credit Karma to prepare and file your return. Nothing new here. It’s similar to setting up an account with any provider you use. But you get a lot of extras from Credit Karma when you sign up, including credit monitoring, access to your credit scores, and two out of the three credit reports available from the major credit reporting agencies—all for free. You don’t even need a laptop to pull it off.

“Credit Karma Tax built a mobile-first tax filing experience,” Christina Taylor, head of Operations at Credit Karma Tax, told The Balance via email. “Credit Karma members can file their taxes from start to finish directly from their smartphones—no matter how complex their tax situation.”

Now that’s a nice, convenient touch.

You’ll be asked to verify your identity via text or phone, and you’ll have to set yourself up with two-factor authentication to access your information on subsequent visits. It might sound like a pain, but these security steps are important in preventing others from accessing your private information. 

And, no, this isn’t a limited-time offer for a 30-day trial. The whole tax program is free. Period. 

The program can lift certain information from your previous year’s return if you use it again in subsequent years, and you can e-file your return when you’re done. 

You also have the option of printing out a copy and snail-mailing it to the IRS. Credit Karma Tax will keep it safe for you when you’re done—it will still be accessible by you on the site after filing. 

Pros and Cons of Credit Karma Tax

Pros

  • It’s free

  • Support from Credit Karma professionals

  • Authorized IRS E-file Provider

  • Encrypted data

Cons

  • Errors are on you

  • Can’t file state return without also filing federal return

In the pros column, Credit Karma Tax offers a lot, especially considering that it’s free.

One nice feature for tax novices is that they can reach out to Credit Karma Tax via email or chat system for explanations regarding tax provisions and technical help with the site right from the app or program. However, you can’t expect to get actual tax advice—only a bona fide tax professional can give you that. 

Credit Karma Tax is an Authorized IRS E-file Provider with dedicated on-site data security personnel in place. Your data is encrypted as you send it over to their site.

The tax program also offers a 100% guarantee that your return is correct—up to a point.

Credit Karma Tax is not accountable for information you entered that’s not correct. Those errors are on you. But it will reimburse you if it makes a calculation error that results in penalties or interest being charged to you by the IRS. 

“If the IRS and/or applicable state tax authority imposes penalties and/or interest on a member due to a Credit Karma Tax calculation error, we’ll reimburse them for penalties and interest up to $1,000 in the form of gift cards,” Taylor said.

And while you can file a state return with your federal return, you can’t file one without filing a federal return, too. 

Who Should Use Credit Karma Tax?

Credit Karma Tax has all the bases covered for the average taxpayer. In fact, it supports 95% of Americans’ tax filing scenarios, according to Taylor, the program's head of operations.

“[In 2018], more than 1.5 million Americans filed their taxes with Credit Karma Tax, ranking us within the top five DIY tax filing companies in the U.S. Of those who filed with Credit Karma Tax, more than half were millennials,” Taylor said.

But it might not be ideal for taxpayers with particularly complex filing requirements, even though it does support all commonly used tax forms. You’re also not left out in the cold if you have a small business or operate as a sole proprietor. Credit Karma Tax accommodates filing Schedule C for self-employed business expenses and Schedule SE for the self-employment tax, as well as Schedule E for partnerships, multi-member LLCs, and estates and trusts.

That said, you can’t file more than one state return. You can’t file a part-year state return, either, or a nonresident state return. Credit Karma Tax isn’t set up to accommodate foreign earned income, Schedule K-1 for estates and trusts, nonresident alien returns, or state filings in community property states when spouses opt to file separate returns.

Filing separate returns when you live in a community property state involves divvying up income and deductions that technically belong equally to both spouses under the law. There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 

You might want to seek the help of a tax professional if you live in one of these states but don’t want to file a joint return with your spouse.

At one point, Credit Karma Tax was unable to accommodate claiming the Earned Income Tax Credit (EITC) for taxpayers without dependents, but that’s changed, according to Taylor. You can qualify for the EITC without a dependent if you’re 25 to 64 years old, filing as single, head of household, or widower, and if your income is less than $15,570 for the 2019 tax year. That increases to $21,370 if you’re married and filing a joint return. You must also have lived in the U.S. for at least half the year and you can’t be the qualifying child of another taxpayer.

Nor is Credit Karma Tax able to help you claim the Health Coverage Tax Credit that’s available to those who are eligible for a Trade Adjustment Assistance allowance due to job loss, or taxpayers between the ages of 55 and 64 whose defined benefit pension plans were taken over by the Pension Benefit Guaranty Corp (PBGC). 

Alternatives to Consider

Credit Karma Tax certainly isn’t your only option. Numerous software providers offer tax programs, although not necessarily for free.

Credit Karma Tax can import information from older returns if you previously used the H&R Block, TaxAct, or TurboTax programs and want to make a switch this year.

However, its tax program is not part of the IRS Free File Alliance (FFA), which can be a cost-free alternative for some taxpayers who earn less than $66,000 a year as of 2019.

“The FFA only allows membership to companies that offer free services ‘to not less than 10% and not more than 50% of the individual taxpayer population,’” Taylor said. “Credit Karma offers 100% free services to 100% of its members, and thus is unable to join.”

Whatever you do, consider all of your options before tax season to ensure your return is filed on time and for a price that fits your budget. 

Article Sources

  1. CreditKarma.com. "Things to Know Before You Start With Credit Karma Tax," Accessed Nov. 1, 2019.

  2. Taylor, 2019.

  3. CreditKarma.com "Forms and Situations Credit Karma Tax Does Not Support," Accessed Nov. 1, 2019.

  4. IRS.gov. "Publication 555, Community Property," Accessed Nov. 1, 2019.

  5. Internal Revenue Service. "2019 EITC Income Limits, Maximum Credit Amounts, and Tax Law Updates," Accessed Nov. 5, 2019.

  6. IRS.gov. "Health Coverage Tax Credit," Accessed Nov. 1, 2019.