As the year winds down, many people are already doing year-end tax planning. As you’re gathering up all your paperwork to tackle your 2016 tax bill, consider this: You could get free federal and state tax filing from Credit Karma beginning next month.
Credit Karma is the latest entrant in the free tax filing market
Each year typically around January, the IRS releases its list of what are called Free File services.
The Free File program allows people who have adjusted gross incomes of $62,000 or less to have their taxes prepared and e-filed for free. (That income limit applies to about 70% of all taxpayers, according to the IRS website.)
But this coming year, there’s a new way to go to get your taxes done for free and your income won’t matter…
Credit Karma — which is a totally free service that makes money by recommending credit cards and loans that they believe would be suitable for you — is branching out into totally free tax preparation.
Unlike the IRS Free File program, Credit Karma’s free tax prep program will be open to all regardless of income. The company will support a dizzying array of tax forms, and they have a variety of identity safeguards in place like double-factor authentication and the use of 128-bit or higher encryption for data transmission.
After all, you don’t want to become a victim of tax return identity theft!
It’s important to note there are some limitations to the Credit Karma free tax product for the time being. Credit Karma does not support:
- Filing multiple state or non-resident state returns
- State filings without a federal return
- Non-resident federal filing – 1040NR (non-resident tax return)
- Foreign earned income credit
- Non-dependent earned income credit
- Married filing separately (MFS) in common law states
- Estate and Trust income from K1 forms
So, now the big question on everyone’s mind: How can Credit Karma afford to do this and how are they being compensated?
‘Our mission is to make financial progress possible for everyone. By understanding your credit and your taxes, Credit Karma can better assist you with your finances,’ CEO Ken Lin writes online.
‘We can monitor your finances, help you make good financial decisions and suggest better credit cards, loans and insurance products. If you like a recommendation and get approved for a product through Credit Karma, we usually get paid.’
For now, you must reserve your spot to get in the queue for the free tax software that will become available in January 2017.
As far as downsides, we should note that Credit Karma is a company that can be difficult to get in touch with over the phone.
If you don’t mind doing all your communication over email, that’s fine. Give this experiment a try.
But if you’re someone who wants to be able to pick up the phone and call if a question arises, you might want to steer clear of this offer!
Read more: 23 ways to improve your finances before 2017