If you want to file your own taxes, these days you have a wide variety of options for how to go about it. While the traditional tax software or the option to hire an accountant are still on the table, fintech has made it easier than ever to find cheap (and even free) ways to file your taxes online.
Cash App Taxes is one of the newer names in the tax filing arena. And while the name may be new, the service has actually been around for years under the name Credit Karma Tax. Now that Credit Karma Tax has been acquired by Cash App and launched under the new name Cash App Taxes, you’ll want to understand how it works and whether it’s the best tool to help you file your taxes this year.
- Cash App Taxes, previously Credit Karma Tax, is a tax-filing service offered by the peer-to-peer payment platform Cash App.
- Taxpayers who might benefit from using Cash App Taxes include single filers, married filers, heads of household, and those with credits and deductions to claim.
- Cash App Taxes likely isn’t right for business owners filing their business taxes, non-resident aliens, or those with multi-state filings and other complicated financial situations.
- Cash App Taxes alternatives include IRS Free File, hiring a professional tax professional, or one of the many other online tax-filing services.
What Is Cash App Taxes?
Cash App is an online payment app that allows you to send or receive money instantly. While it primarily serves as a peer-to-peer payment service, the company also offers a bank account with a corresponding debit card to spend and manage your money just as you would with a traditional checking account. Cash App is owned by the fintech company Block Inc, formerly Square.
Cash App also now offers Cash App Taxes, which is a 100% free tax filing service that allows you to file both your federal and state tax returns quickly from either your computer or phone.
Cash App Acquired Credit Karma Tax
Cash App was founded in 2013 but didn’t add tax filing to its suite of products until 2020 when it acquired Credit Karma Tax. Prior to the acquisition, millions of people had used Credit Karma Tax to file their annual tax returns. Under the new name and ownership, Cash App Taxes promises to provide the same free service.
How To Use Cash App Taxes
Cash App Taxes promises a free and simple solution to help you file your annual federal and state tax returns. Below you’ll find a step-by-step guide to filing your taxes with Cash App Taxes.
Step 1: Sign Up For Cash App
To use Cash App Taxes, you’ll first have to sign up for a free Cash App account. You can sign up by downloading the app directly from the app store from either the Android or Apple app stores.
You can also find the app by clicking the sign-up button on the Cash App website and scanning the QR code you see when you’re redirected. Signing up is free and takes just a few minutes.
Step 2: Follow the Instructions Provided by Cash App Taxes
One of the benefits of using an online tax-filing program like Cash App Taxes is that it takes much of the guesswork out of filing your taxes. Rather than having to navigate Form 1040 and other parts of the tax return on your own, you can simply follow the prompts.
Step 3: Import Last Year’s Tax Information
If some of your personal or financial information is the same as last year, you might be able to save some time entering information. Cash App Taxes can import information from last year’s Form 1040 to your current return. You can import your existing information from Credit Karma Tax, H&R Block, TurboTax, and TaxAct.
Step 4: Compare Itemized vs. Standard Deduction
One of the biggest questions many people have when filing their taxes is whether they should itemize their deductions or claim the standard deduction. While you can certainly figure it out on your own with a bit of math, Cash App Taxes will use the information you’ve shared to tell you which deduction makes the most sense for your situation.
Step 5: File Your Taxes
Cash App Taxes is free to use for filing both federal and state taxes. Some other services may offer to file your federal return for free, but then charge you to file your state return or add fees if you have additional deductions and credits. But Cash App Taxes’ service is free for both state and federal returns even with deductions and credits.
Step 6: Get Your Refund
Once you have filed, you can wait for your refund. Cash App Taxes promises you’ll get your refund faster if you have your return deposited into your Cash App account. There is no guarantee how fast you will get your refund—it will depend on when the IRS sends them and when they are made available to you.
Note for Credit Karma Tax Customers
If you’ve previously filed your taxes with Credit Karma Tax, you can easily file your return with Cash App Taxes or download past returns if you plan to file elsewhere.
Information from last year’s tax returns will automatically import from your Credit Karma tax account. And as of January 2022, Credit Karma tax users have been able to access their previous tax returns through Cash App Taxes.
Should You Use Cash App Taxes?
Cash App Taxes is one of many tax-filing services on the market, and it can understandably be difficult to compare your options and choose the right one.
To help you choose the best tax filing software for you, we’ve summarized the pros and cons of using Cash App Taxes.
When Cash App Taxes Works Best
Plenty of taxpayers will find that Cash App Taxes meets their needs. First, the service is free to use, which isn’t the case with many competitors.
This service is also available for all filing statuses. You can file with Cash App Taxes if you’re single, married filing jointly, married filing separately, a qualifying widower with a dependent child, or head of household.
If you have tax credits or deductions to claim, Cash App Taxes may still work for you. Not only can Cash App Tax help you claim a variety of credits and deductions, but it can also compare your deduction options to help you decide if claiming the standard deduction or itemized deductions is best. Cash App Taxes also allows you to claim income or losses from a business on your personal tax returns, although it does not support business returns.
When Cash App Taxes Doesn't Work as Well
While Cash App Taxes does have advantages for many taxpayers, it’s not right for everyone. First, while Cash App Taxes can help you file your personal tax return with business losses or income, you can’t actually use it to file your business tax returns. If you have an S corporation, C corporation, partnership, or multi-member LLC, you'll have to find a different solution.
Cash App Taxes also can’t be used by non-resident aliens. You can file with Cash App Taxes if you’re a U.S. resident or citizen, but you’ll have to find a different option if you’re a non-resident filing with Form 1040NR.
Cash App Taxes also can’t be used for multi-state filings, part-year fillings, or foreign earned income. You also won’t be able to use this service if you’re married filing separately in community property states, or filing a state return without also filing a federal return.
Finally, you may wish to hire a tax professional instead of using Cash App Taxes (or another tax filing service) if you have a more complicated tax situation. Cash App Taxes guarantees an accurate return based on the information you provide, but an accountant can help ensure you’re providing all of the right information.
A tax professional comes with other benefits, including tax planning for the year ahead, representation for you in an audit, and more. These are personalized services that software like Cash App Taxes simply can’t match.
Alternatives to Cash App Taxes
Cash App Taxes is just one of the many tax-filing services on the market. Below are some alternatives you might consider, depending on your situation. It’s far from a comprehensive list but it can help get you started in exploring your alternatives.
IRS Free File
It’s always free to file your taxes for free directly with the IRS using what’s known as IRS Free File.
If you have an adjusted gross income of $73,000 or less, you’re eligible for free guided tax preparation from the IRS. And even if you earn too much for the guided tax preparation, you can complete and file the forms yourself for free.
TurboTax by Intuit is another popular tax filing service. TurboTax allows you to file your federal and state tax returns for free on your own using their simple guided prompts. You can also file with the help of a tax professional. TurboTax’s basic option starts at $80 but TurboTax has offered the service for free for early tax filers.
You may decide not to use tax filing software at all and instead hire a tax professional. While it may be more expensive, this route also comes with plenty of benefits. You’ll have an actual person to speak with, which some people may prefer. Hiring a professional may also be well-suited to those with more complicated tax situations.
The Bottom Line
Since acquiring Credit Karma Tax and changing its name to Cash App Taxes, Cash App has become one of the leading options for online tax filing. It’s free to use and works for many different tax situations. Just make sure you understand what limitations Cash App Taxes may have and how they’ll affect you.
Frequently Asked Questions (FAQs)
When do you need to pay taxes on Cash App transactions?
In addition to offering its tax-filing service, Cash App also serves as a peer-to-peer payment app. While you won’t have to pay taxes on any personal transactions you use the app for, you will have to pay taxes on business transactions.
Cash App will send you Form 1099-K if you have more than $600 of payments in your business account. You’ll have to report this income when you file your tax return and you can expect to pay taxes on it just like any other form of income.
Can I file state taxes with Cash App Taxes?
Yes, you can file your state tax return with Cash App Taxes, and just like your federal return, it’s free to file. However, you can’t file your state return unless you’re also filing a federal return with Cash App Taxes.