Similar to finance, before I started my path to financial independence, taxes baffled me. And when something baffled me – I didn’t want to do it π . I had classic “If I’m not naturally good at it, what’s the point?” syndrome.
This approach led to my Mom volunteering to do my taxes my first year out of college. I thought nothing of it and I assumed she knew what she was doing since she’d been doing it for so long. Well, 5 years later I received an $800 check in the mail from the IRS. At first I thought it was a scam somehow. Why would the IRS send me hundreds of dollars?
But after some investigating, I discovered that this $800 was the amount I was supposed to have received those 5 years ago, my first year out of college, when I needed that money the most. With investing, I would have almost doubled that money in the time I waited for the IRS to figure out our mistake. In my Mom’s defense, taxes in general are complicated, NYC taxes even more so and I obviously appreciate her helping me, but this was a turning point. This confusion inspired me to look more into how taxes work and become more self-sufficient. I didn’t want to miss out on my own money again.
“Confusion And Mystery Are Built Into The Design”
Little did I realize that taxes in the US are like our investment system – they’re intentionally confusing EXACTLY so that people hire financial professionals to deal with it when really they could be dealing with it themselves. But instead of an investment prospectus with vague and weird language that tries to make investing in the stock market seem like a mystical quest, our current tax forms seem convoluted and at times redundant just to add confusion.
However, for investments, we now know that index fund investing is the way to go. It’s straightforward and gets the best results over the longterm. And now for taxes, there are many services that offer easy question based ways to fill out any tax form. The only problem for me was: Many of these services are misleading at best and predatory at worst.
No More Bait And Switch
Websites such as TurboTax and TaxAct claimed to be free and then when you were almost done inputting all your information, they always told me that actually your taxes are too complicated (they just included a W-2…) and that I would have to pay $30-50 instead. The sunk cost fallacy related to my time made me pay these grifters and I would feel cheated for months. I thought we had a sacred tax bond you know π .
Well luckily, that is all in the past because the company Credit Karma stepped up and created a Tax Filing service. I’ve been using Credit Karma to check my credit score since I learned what a credit score was π and so I trusted them enough to try this new service 3 years ago.
And then I was blown away to discover: IT’S ACTUALLY COMPLETELY FREE. Not just for federal, not just for state, not just for whatever tax forms the service deems “not complicated.” Credit Karma Tax is free for every type of form and for federal and state filing, for everyone.
IT’S FREE!!!
So I want to shout from the rooftops about this free and easy option because I keep getting ads following me all over YouTube from TurboTax saying that they have free tax filing when that is at best misleading and at worst a straight up lie. I want everyone to not pay money unnecessarily that inevitably goes towards these sketchy ads so the cycle continues!
So let’s dive into my experience with Credit Karma Tax and what I love about it:
Save Even More Money
Not only is Credit Karma Tax free, but it also has saved me additional money. I like to do my tax estimates throughout the year (yeah I’m a nerd) just to see how much I might owe or receive. Well, all of my calculations pointed to me owing $600 for 2020.
However, after I had input all of my information, Credit Karma Tax asked if I would like to check if I would receive a stimulus credit, and despite reading the news fairly regularly and having looked into how the stimulus payments worked, I didn’t realize that if you don’t receive all the stimulus (and I had not) you get a tax credit instead. Because of that tax credit, I was then set to receive $600 instead of owing it and I’m not mad at that π .
Quick And Easy
As I mentioned, Credit Karma Tax goes through a simple series of questions and then fills out any forms you need accordingly. Also, one aspect I love is that they then give you the forms when they’re complete so you can see how those questions translated into the formulas. My taxes this year were more complicated than they have ever been.
I had W-2 income, self-employed/miscellaneous income (1099-MISC), dividend income (1099-DIV) and interest (1099-INT) to account for. But once again, as in years prior, this site made it super simple to input everything, showed me why my refund amount was changing and allowed me to submit my form.
In fact, I talked in my last monthly update about how I accidentally did my taxes because I planned to just poke around on the first day tax returns were accepted, but instead ended up submitting them because it was just so easy.
Helpful Updates
In the past, I have submitted my taxes on a random day in March or even April and received an email from Credit Karma Tax that it was successfully submitted to the IRS…and then two minutes later, an email that my tax return was accepted by the IRS π .
This year I suspected it would take more than 2 minutes since I was filing on the first day possible and we’re in the middle of an unemployment crisis, so I imagine people are filing immediately because they need any refunds ASAP. But to my surprise after submitting my form at 6pm on a Friday, I received an email from Credit Karma Tax that the IRS accepted my tax return at 12:01am on Monday morning.
The IRS is working weekends now?! Damn that’s hardcore! Anyway, I was told that my refund could take 21 days to hit my account. Instead, it was there in 10. Despite my 2020 taxes being my most complicated ones yet, I finished submitting them in less than 30 minutes and can already put my refund to work. I’m loving it π .
My $600 tax refund just hit my bank accountππΎ. Time to make it rainπ°!…and by make it rain I mean pay for 66% of a future month's nomad rentπ. https://t.co/5FzbN7ztem
— A Purple Life (@APurpleLifeBlog) February 23, 2021
Conclusion
I’m all about sharing the love when I find an awesome, free service so I can’t say enough about Credit Karma Tax. They have been my tax filing service of choice for the last three years and will be for the foreseeable future. I hope putting this out there has saved you a few headaches and a few bucks.
How do you file your taxes?
I also use Credit Karma tax! Started last year because I had 1099-MISC income as well as a W2 and apparently that was ~ too complicated ~ for H&R Block so they wanted to charge me like $70, ugh.
The one snag I hit with Credit Karma this year is when I was helping my brother – he lived & worked in two states and they don’t support multi-state filing. However he can still file his federal taxes through them and he can file his state taxes for free directly on their websites. More work and hassle for sure, but fortunately still free.
Too complicated indeed *eyeroll* lol. Good to know about multi-state! I’ve only had to do that when I filed without using any service.
I’ve been using Credit Karma for the last two years. Love it! I still kick myself when I used TurboTax and paid for tax returns. However, I didn’t know at that time that Credit Karma did taxes. Shouldn’t taxes be easy or automatic since we live in the “greatest” country in the world?
That’s awesome! And yeah I’m with you – I paid them too much money because of inertia, but no longer! I’m just happy I made the change and take the rest as the cost of ‘education’ π . And don’t even get me started on how we are no where near the greatest country in the world π .
I think this is the year Iβm going to switch to credit karma. I went through turbo tax and got three separate upsells this year. I mean Cβmon!
THREE?! That has to be a record. Yes please switch – it makes me feel so happy knowing people are saving money (and saving headaches – come on TurboTax!)
For years I used Turbo Tax, but I listen to Clark Howard and he was pleading with people to use free software. He had several on his site and it seemed like OLT (online taxes) would work for my federal and state. I fully expected to hate it and end up back at Turbo Tax, but it worked awesome. Had the step by step questions that Iβm accustomed to. Mine were accepted within a few hours and had the refund in about a week. I need to focus on the positive of finding a free solution instead of kicking myself for all the money I wasted with the TT scam. Next year I may try Credit Karma because this OLT did have some age and income parameters.
That’s awesome you found a free service that works well! And woohoo on it being accepted and getting a refund so fast π . And I am with you – I kick myself too, but try to think of it as the cost of the lesson.
Just an FYI… TurboTax and Credit Karma are owned by the SAME company.
TWIST!!! Then like all companies I will brace myself for when they become awful π .
Well, this was timely – as I was just about to make an appointment to have my taxes done! Instead, I’m heading over to Credit Karma. I’ve used Turbo Tax in the past & yeah… felt like I was being taken for a ride…
And not a fun ride either haha. That’s cool – I hope you like it!
I used Free tax USA , which is also good. The federal is free , but state return is $12.
I just filed the state on my own after seeing how it was done on the site.
I also, used to be very confused by taxes. Now less so.
Thanks for the info.
Cool! But also…state isn’t free when free is in the name *eyebrow raise*? Smart you filed them yourself after seeing what was up. And of course!
Purple, you rock. Turbo Tax Sucks Ass (as Hasan Minhaj would say…) and I was not looking forward to another year of upsells. I’d heard good things about Credit Karma’s filing system but was a little wary of a free software until I read your brilliant review. I’ve already finished filing!
(And in the time it took to submit this comment, my federal return was accepted. In 3 minutes. What sorcery is this??!)
Aww thank you! And woohoo congratulations for being done for another year haha. And woohoo on a 3 minute acceptance! It’s awesome sorcery π .
Dammit, I have to look at this now. TurboTax got me on an upcharge (said I HAD to for some investment return or another), but they did hit that harder than usual. But they have all my info already and it’s such a pain to start anew haha. I had no idea Credit Karma was free (well, so is TurboTax in theory). Maybe next year!
Ugh I’m sorry. That’s funny about the information – my partner and Mom said the same thing about “they have all my info” but then I asked them…what info? Your address? Cause the rest you have to input anyway lol. And Credit Karma even lets you drop W-2 PDFs and auto-inputs the information so you don’t have to do it. Anyway, maybe I’m missing something, but I do understand inertia is a powerful force. That’s why I used those services for years.Β Next year!
I was so excited to read this because I almost did TurboTax again for who know how many years now, but then I found Credit Karma blocks me from the site outside of the US. (Similar to you, I just FIREd, and I’m currently geo arbitraging in the house I bought in Mexico a few years ago. So FYI in future years if you’re abroad during tax season you can’t access Credit Karma.) Thankfully I still managed to deprive TurboTax of the $140 they almost got from me because I discovered MyFreeTaxes.com is another free way to do them with no income limits and I was also able to do my Schedule Ds for capital gains/losses on transactions. Both state and federal were 100% free. I ran them against what I’d done on TurboTax and the numbers came out exactly the same.
So thanks, Purple! And good luck to you. I’m a month into early retirement (at 41) and I have the same reaction as you to the question you were asked on Bigger Pockets Money of “Do you miss work”— hahahaha Never.Going.Back to traditional employment. Buying back my time is priceless.
Good to know! Did you try using a VPN with the country set to the US? I’m curious if that would solve it. Congratulations on your house in Mexico! That sounds fun. That’s awesome about MyFreeTaxes.com as well. Woohoo on depriving TurboTax of money they didn’t earn π ! And YAY on your early retirement! Time is indeed priceless.
Yes, a VPN would definitely work. Because of Covid I’d been working remotely until I quit my job and whenever I had issues like that with certain sites blocking me (e.g., some banks wouldn’t let me transfer money) I would do it through my work VPN. But of course no Citrix anymore with no job. π I’m not that motivated to get a VPN of my own because I’m only 45 minutes south of the US border and could’ve just driven up there to use Credit Karma if I hadn’t found the other site. Anyway, thanks again!
Awesome! My partner has a VPN and it’s not related to our companies so I’ll make a note to use that if we’re abroad when I’m filing in the future. And I love your backup plan!
I gave Credit Karma a shot this year, since I’m still young and experimenting in search of a good tax service.
Sadly this year I had a Schedule K-1 share of income from a trust that Credit Karma doesn’t support π
Hopefully there’s a decent tax service out there that fits my situations.
Oh no – I’m sorry they didn’t support that form. Good to know they do have some limitations. I hope you find a service that works for you!
Thank you so much, Purple! All these years I assumed (ut-oh!) Credit Karma wasn’t for me, as I file with a W2, 1099 AND Schedule C. Boy, was I incorrect. I successfully filed both Federal and State yesterday evening. And, yep, it was free! A) I know better at my middle-ripe-ol’-age to never assume and B) I owe you a beverage of your choice if we ever meet. Thank you for saving me $150+!
I’m so SO happy to hear that!!
I have been using Freetaxusa for years to file my taxes. I liked it, and could file my Federal return for free, but always had to pay to file my state return. So this year when I got to the screen telling me I’d need to cough up $15 to file my state taxes I paused and remembered this article. So instead of proceeding, I decided to try out Credit Karma. It was actually very easy to use and totally free. No charge to file state or federal returns. And somehow, Credit Karma determined I was owed a slightly larger sum than FreeTaxUSA. Score! I hit submit and was shocked that my federal return was accepted within MINUTES. Truly amazing. Thank you so much for sharing this service and your review!
Oh interesting – another commenter mentioned they could file their state on that site for free. I guess it varies based on the state. So happy you had a good experience on Credit Karma, saved some dough and got a bigger refund?! Woohoo!! And of course!