The tax season is creeping up and those W-2s, 1090s, and other federal tax forms will be making their way to your mailbox, as well as state tax forms for state returns.
Though some citizens choose to seek the one-on-one help of a CPA or other tax preparer, others go the semi-DIY route, leveraging the many digital tax services available to consumers.
There have always been a few top-contenders in the tax preparation space, including TurboTax, but in recent years, Credit Karma has joined the ranks and now offers a completely free filing service.
Both TurboTax and Credit Karma offer federal return and state filing services, the ability to upload W-2s, a knowledge base, and an easy to follow tax preparation process, but when it comes to Credit Karma Tax vs. TurboTax filing, who is your best bet?
In this comparison:
What is Credit Karma Tax?
Credit Karma has long been known as a resource for those seeking to take control of, improve, and monitor their credit. The company, which has been around since 2007, provides consumers with free access to their credit score, and today they have over sixty million members. In 2017, Credit Karma expanded their offerings by adding a new self-directed tax preparation that’s free.
Credit Karma offers free federal and state tax services, which includes many of the slew of popular IRS forms and state forms that you may need to file. Unlike other services, which typically have tiered pricing for added features or forms other than the basic 1040A and 1040Z, Credit Karma is completely free of charge—there are no price tiers for filing income tax returns.
Features and Ease-of-Use
Those who choose to use Credit Karma for filing taxes will find a clean and easy-to-navigate interface that allows users to select and complete specific portions of their tax returns, including entering W-2s, basic life and household information, and selecting life events (e.g., buying a home, birth of a child, etc.) in separate modules. This is a bit of a departure from other services, which typically take a guided “wizard” approach to tax prep.
Further, users can import their prior year’s tax returns—even if they were not completed using Credit Karma—and they can also take a picture of their W-2 and upload it to make that part of the process easier.
One drawback, at least for small business owners or sole proprietors, is Credit Karma’s limited resources for business credits, and those who are eligible to claim specific small business tax credits will need to file elsewhere.
Customer Service and Support
Credit Karma offers a somewhat robust resource center that contains an FAQ section; however, the personalized customer service is lacking, with the primary method of contact occurring through online email submission—there is no option to upgrade to one-on-one help for assistance with different tax situations.
There has been a chat option in the past, and one would assume that they will revive it during the 2019 season. However, some customers noted that the feature was unreliable and often frustrating.
That said, Credit Karma has made yearly improvements, and there is a possibility that the chat issues will be addressed in the 2019 version. Calls are typically saved for advanced issues or concerns.
Who It’s Best For
Credit Karma is free, making it an accessible option for those on a budget or for those who don’t want to fork over a fee to file returns, including those that go beyond the basics. This is particularly true since many other services require users to upgrade to file advanced forms and often charge for state forms.
However, even though Credit Karma is essentially easy to use, it lacks that step-by-step guidance and education that some of the other resources, like TurboTax, provide. As such, first time filers or those with slightly more complicated returns may find Credit Karma to be lacking.
If you’re comfortable enough to navigate through the sections with minimal guidance, and if you’re somewhat aware of the deductions and credits that you may be eligible for, then Credit Karma is a good option. It’s a free tax filing solution that’s easy to use.
What is TurboTax?
TurboTax is arguably one of the most widely known tax preparation services and tax preparation software platforms available to U.S. citizens, and their popularity is partially rooted in longevity. The program itself was developed in the mid-1980s, and in 1993, it was acquired by Intuit the well-known business and financial software company. Today they offer a host of services and resources, both online and offline.
TurboTax has a tiered pricing structure that offers various levels of complexity and support based on the software package you choose. The basic version, or Free Edition, allows users to file 1040Z, 1040A, and state taxes free of charge. Advanced versions are priced as follows, though each of these will require additional payment for state filing services—typically $29.99 or $39.99.
Deluxe: At $59.99 ($39.99 w/promo) this package allows users to maximize their returns, claim charitable donations, and get the homeowner tax breaks, as well as other deductions.
Premier: Available for $79.9 ($59.99 w/promo), this package includes all the Deluxe features plus the ability to report rental property investments and income.
Self-Employed: At $119.99 ($89.99 w/promo), this is the top tier of the TurboTax product line. It includes all features available to Deluxe and Premier customers but is expanded to account for the needs of freelancers, independent contractors, etc.
Users that want to secure the live help of a CPA or EA can do so by selecting the TurboTax Live service, which is available at all levels above, but with an additional cost. The basic addition starts at $79.99 ($49.99 w/promo) with each tier increasing in price and maxing out at $199.99 ($169.99 w/promo).
Features and Ease of Use
TurboTax is notably one of the easier to use tax preparation services and is structured as a guided, step-by-step service where users are frequently provided educational feedback that can help them determine the best way to maximize their tax refund.
All versions, including the basic, include an Audit Support Guarantee as well as 24/7 support from the online community, which includes specialists and customers, though that shouldn’t be confused for the live support offered with an upgrade to TurboTax Live.
Users can upload their taxes from previous years, even if they were completed by one of TurboTax’s major competitors. However, those who have filed with TurboTax the prior year can simply log in to access that info.
As discussed above in the pricing portion, each package includes increased support. Investors may be pleased to find that the Premier version now includes the ability to account for gains and losses in cryptocurrency in addition to the typical stocks, bonds, ESPPs, etc.—offers that have traditionally been included.
Further, those who purchase the Premier version will have access to credit score information, while those who need the Self-Employed version gain access to useful guidance from self-employment specialists as well as expense, mileage, and job tracking provided via QuickBooks.
Customer Service and Support
TurboTax offers a tremendous educational resource that supports customers through videos tutorials and online communities as well as during the system-guided, step-by-step filing process. However, useful as those resources are, if you’re looking for one-on-one, on-screen customer support, then you’ll need to upgrade to the TurboTax Live version.
In some cases, particularly if you have complex taxes or you’re filing 1099 forms for the first time, this may be money well spent. On the other hand, if you’re filing very basic tax forms, the system-guided versions, paired with the existing educational resources, is likely enough.
Who It’s Best For
Because TurboTax has dropped their state filing fee for basic users, the Free Edition can be a great option for any user that has simple tax returns and doesn’t want to spend money on tax prep. It’s also a good option for those who want more support or have more complex needs, like those associated with self-employment, investments, etc.
How Do Credit Karma Tax and TurboTax Compare?
|Prices||Features & Customer Service||Best For|
|Credit Karma Tax||Free||User friendly interface|
Prior year tax return import (even if not completed with Credit Karma)
W-2 photo upload
Customer service lacking
|Users who are looking to avoid fees and do not need extra guidance|
|TurboTax||$0 – $199.99||Guided step-by-step service|
Audit Support Guarantee & 24/7 online support
Prior year tax return import (even if not completed with TurboTax)
Tutorials & other educational resources
|Users who do not want to spend money on tax prep or who have more complex needs|
So, who wins when it comes down to Credit Karma Tax vs. TurboTax?
Credit Karma is a consumer credit resource, and they’ve designed a decent online tax prep service, especially when you factor in the fact that it’s completely free to use and to e-file with.
They offer a wider range of tax forms such as the 1040EZ, the 1099 and more income tax forms, W2s, which makes it a good option for those who know a thing or two about their taxes and need to file more complex forms with itemized deductions that typically come with a charge on other services.
However, they lack some of the features and educational resources that only come with years of experience, which is something TurboTax has. In the past, state filing came with a fee, but that has changed, and now those using the Free Edition can take care of federal and state at no cost.
Further, those who prefer increased guidance and the option for one-on-one support may find TurboTax to be the better option. Additionally, filers who have complex investment needs or are self-employed may find it a better fit.