Credit Karma Tax made a good first impression when it debuted four years ago—especially considering that it provides free tax preparation and filing and supports most major IRS forms and schedules. State filing is also free. That makes it a unique offering, and it’s a good-looking tax website with intuitive navigation tools, to boot. You might consider Credit Karma if you have a simple return or are very tax-savvy, as its help content is still insufficient. Free is appealing, especially at tax time, but competitors explain the tax code in much more detail, and that might end up saving you both money and time in the long run. Note that tax season isn’t quite here yet, so this is an unrated preview which we’ll update a little later in the year.
Still, in a year when so many Americans had to file for unemployment or take on side gigs because of the slowing economy, it provides a free path to filing a Schedule C. Competitors, with the exception of FreeTaxUSA and TaxSlayer, charge a lot for self-employment support.
From Credit Checks to Taxes
You’ve probably heard of Credit Karma, which was founded in 2007 and claims more than 100 million members. Credit Karma provides free credit scores and reports on a weekly basis, showing the factors that contribute to them, too. The service monitors for suspicious activity and alerts you to potential problems. You do have to sign up for a Credit Karma account to even get access to Credit Karma Tax, which may be off-putting for some. Honestly, however, keeping an eye on your credit is a good idea, and Credit Karma is very good at this.
There are alternatives, though, if your tax situation is simple enough or your budget is tight. Most of the competition offers a free level, and FreeTaxUSA (which provides more guidance and tax tools) is free for the federal return, though it charges $12.95 for a state return. TaxSlayer Classic is only $17 for federal filing, and it supports the lion’s share of IRS forms and schedules.
A Familiar Approach to Taxes
If you’ve ever prepared taxes by hand, you know what a time-consuming, confusing, and frustrating process it can be—especially if your return requires filing multiple forms and schedules in addition to a 1040. You have to do all of your calculations yourself, and that’s after finding the correct forms, schedules, and tax documents you need. Likewise, you have to transfer the correct figures from the correct documents onto the correct lines on the 1040.
Like all tax preparation services, Credit Karma Tax provides an online alternative to paper-and-pencil tax preparation. It takes control of the whole process like a human tax preparer in an office might do, asking you questions and recording your answers. You simply read the questions on the page and provide answers by clicking buttons or entering data before moving on to the next set.
Credit Karma Tax works in the background as you progress and enters your answers on the correct lines on the appropriate forms and schedules after doing all the necessary calculations. If you run into an unfamiliar concept, there’s often (but not always) help content you can consult. When you finish entering everything that pertains to your federal tax situation, the site transfers the relevant data over to your state return, if you’re required to file one. All personal tax preparation services operate this way.
Basic Information
If you want to use Credit Karma Tax, you first have to sign up for the Credit Karma service, as previously mentioned. You supply some personal details, including the Social Security numbers of anyone whose name will be on the return.
Once you’re on the tax site, Credit Karma Tax asks about the same things that all personal tax websites do: your marital and dependent status and your 2020 income and expenses (like self-employment income, contributions to retirement accounts, homeownership, and medical expenses). The site uses this information to tailor your online tax experience.
The service also asks if you want to link your account to Square’s Cash App (Square recently entered into an agreement to acquire Credit Karma Tax). Cash App launched in 2013 as a peer-to-peer money transfer service and has grown to include access to related financial services for spending, sending, storing, and investing money. Its financial tools include direct deposit, a cash card, and fractional investing in traditional stocks and bitcoin. This connection is optional.
The topics you selected in your first steps appear in Credit Karma Tax’s main home page, which you use to navigate the site. It consists of a series of blocks labeled with their content (such as W-2, Investments, and Home). You can still add topics at this point even if you didn’t indicate earlier that they applied to you. If you haven’t visited a topic yet, there’ll be a button that says Start. If you have, it will say Edit/Review.
H&R Block Deluxe and other websites work similarly. They quiz you upfront about your tax-related situations and organize the rest of the site’s path to make sure they’re covered, giving you the option to go beyond if necessary.
The Credit Karma Tax User Experience
Credit Karma Tax’s user interface is attractive and intuitive, especially considering this is only the service’s fifth annual iteration. It’s simple and clean and uses a pleasing combination of fonts and colors in a well-designed layout. Graphics are minimal and some screens are absolutely unadorned, which probably contributes to its speedy screen changes.
The vertical list of topics on the home page is arranged more or less the way you would work your way through the 1040 and its supporting documentation, similar to the go-it-alone option other sites like Jackson Hewitt offer. No matter where you are on the site, you can click on a link in the upper right to slide out a vertical pane on the right side of the screen that contains several housekeeping tasks, one of which is to return to the tax home page directly. Once you finish a topic, your only option is to return to the tax home page and work on another topic. Some competitors like TurboTax make tax preparation one long continuous process. You can also view PDF versions of all of the actual tax forms on which you’ve entered information at any point in your journey.
Progressing through the site is easy. Sometimes, you simply click Yes or No buttons to move on. Other screens have Back and Continue buttons that return you to the previous screen or move you forward. Once you enter a topic area, Credit Karma Tax makes statements or poses one or more (sometimes many more) questions on every screen. You respond in one of a handful of ways. Some screens contain blank fields for your answers. Sometimes you select an option from a drop-down list or click a button to provide your response. On screens that contain an exceptional number of questions, like those supporting the Schedule C, you can toggle back and forth between a full-form view and one that reduces the number of questions on each page. This is unique to Credit Karma Tax.
A word of warning here: Credit Karma Tax insists that you complete every required field before advancing to the next screen. Most competitors allow you to continue and to bookmark the page so you remember to return to it. So, if you’re going to use the site for your preparation and filing, be sure you have all the needed information before you start.
Getting Down to Details
Once your household’s personal details are complete, you move through the topics and subtopics on the tax home page, such as your W-2, self-employment or side gigs, home ownership, tax payments, and deductions and credits. Topics you didn’t select in the introductory screen, or for which you’re not eligible, are hidden, but you can click a link to reveal them. Credit Karma Tax is slightly different from TaxAct and other services in that it displays all of the site’s topics on one dashboard instead of providing separate ones for income, deductions, credits, state, and review. This doesn’t affect usability; it’s just different.
A word about W-2s: If you are an ADP or Equifax subscriber, you should be able to import your form data directly. If you’re not, you can either scan your W-2 or take a picture with your phone and upload it. Credit Karma Tax will then move your information to the correct fields. Precision is critical here, and the company stresses that you should always double-check your numbers if you use one of the latter methods. You can, of course, just enter everything manually.
I ran into some problems when I entered my test return. For example, I tried to claim a Dependent Care Credit and was able to enter the provider’s profile. But the next screen wanted me to select the relevant dependent, and that information hadn’t been carried over from the Basic Info section. I had to enter some of that individual’s identifying information again. Also, the site doesn’t support some critical forms, such as part-year or multiple state returns, Form 2210 (Underpayment of Estimated Tax) and Form 8885 (Health Coverage Tax Credit).
Reviewing Your Return
After you complete every relevant section, the service reviews all the answers you provided. If Credit Karma Tax finds errors or omissions, it offers to take you back to the offending screens to fix them. This worked OK for me this year, though I was asked to enter my spouse’s name and Social Security number and birthdate, something I would have assumed would have been caught earlier. When I fixed the error, the site popped me back to the review page and told me I was ready to file.
Help, Reconfigured
Anyone who has ever prepared his or her own taxes knows that questions always arise, and that getting quality help is absolutely critical. Credit Karma Tax hasn’t had the years (or even decades) to build up the support resources that its competitors have, so the guidance it offers is still sparse in comparison. It does a fairly good job of letting you know what it’s looking for on every screen, but it doesn’t hyperlink complex terms the way TurboTax does, for example. Credit Karma Tax often doesn’t even fully explain the current question or concept.
The service does display a small circled “i” at the end of many lines. These links offer a brief explanation of the current topic, but some are sketchy, and others are not particularly useful. Take the Qualified Business Income (QBI) deduction, for example. Granted, this is an exceptionally complex area of tax law that can be puzzling even to financial professionals. But there’s very little information provided for a deduction that can save some businesses a lot of money.
This lack of detail occurs at various points throughout the site, even for simple concepts. In addition, the site sometimes directs you to consult an IRS publication, which is a serious drawback for a tax website help system (some competitors do this, too). Credit Karma Tax does generally rephrase tax law into simpler terms for most topics, but not in as much depth and breadth as rival sites do.
Credit Karma Tax has help tools at the top of the screen, but they acted inconsistently in my testing. When the home page was open, a search box appeared that would return links to both related forms and relevant articles. That’s great. When I clicked on the Help button that was right next to it, a series of general FAQs slid out from the right in a vertical pane.
But when I went any deeper in the site, the Search box disappeared. I clicked the Help button and got a message with a link to the Help Center (why the extra step?). Here, I was able to search for educational content – some of which was quite good, simple, and well written. There were usually links to at least a couple of relevant articles—several, in some cases—but the additional links would then start to veer off into unrelated areas, like “What credit card should I apply for?” TaxSlayer, for example, does a good job of focusing some of its help content so there aren’t as many extraneous hits.
Other tax sites also dribble off into answers to questions you didn’t ask, similar to how a generic Google search works. H&R Block Deluxe in particular, though, is much better at returning relevant, helpful answers to searches. If you’re really stumped, you can start a chat with a Credit Karma Tax support team member 24/7 (technical site questions only, not professional tax help like so many offer). You can also submit an email.
Security
Credit Karma uses 128-bit or higher encryption to protect transmission of data and encrypts that data when it is at rest. The company has a dedicated security team that investigates potential issues as quickly as possible. It also works with independent third parties that assess the site for vulnerabilities. And Credit Karma alerts you as quickly as possible if it detects suspicious activity on your account.
Similar Mobile Access
Credit Karma Tax is the only mobile tax service that is totally free for both federal and state filing that supports all major forms and schedules. The site you experience on your mobile device—even a small smartphone like the iPhone SE—is the same as what you’ll see on your desktop browser (only smaller, of course). Credit Karma does not offer a dedicated mobile tax app. Instead, you can simply access the same site via your browser. I tested this site on iOS and Android devices and found the functionality to be good on both, and the experience to be very similar to what I saw via my desktop.
I did have some trouble with the help tools. When I clicked the Help button, the FAQ screen opened, which functioned like the search box on the desktop site. I could also click a link to go directly to the Help Center. I had a problem with the iOS version, though. Once I was in the Help Center, I was unable to return to the main site. The Help Center opens as a separate window on the main site, and I had been able to shut it down by clicking the X in the corner on the Android version. To access the X on the iOS version, I had to pull the screen down with one thumb and click the X with the other thumb.
Room to Grow
Credit Karma Tax claims to support major IRS forms and schedules, and indeed it does, at no charge for either federal or state preparation and filing. That said, it’s still missing some forms. Furthermore, some complex topics, like investment sales, do not receive the step-by-step data entry and guidance that sites like TurboTax offer. You have to fill in a table.
A personal tax preparation website must have exceptional help resources if it hopes to serve taxpayers who need to wrestle with complicated topics like rental property income and self-employment. Credit Karma Tax provides the tools for dealing with such complexity, but its guidance is still lacking compared with the competition. It’s a solid fifth effort from the company, and it might do the trick if you have a relatively simple return or you really know your way around a 1040. If either—or, better, both—of these conditions apply to you, by all means, give Credit Karma Tax a shot. It is free after all, and if there’s one thing everyone thinks about at tax time, it’s dollars and cents. Stay tuned for our fully rated review a little later in the year.
While you’re working on getting a handle on your money, you might also want read our coverage of the best personal finance software, and if you run a small business you should consider our overview of the best accounting software.
