Back in November 2020, Credit Karma Taxes was purchased by the financial services and money transferring company, Cash App. Credit Karma Taxes was a service used by millions to file their taxes digitally for free. Cash App has transformed this service to become what is now known as Cash App Taxes. This app is very similar to the Credit Karma Taxes service it was built from, but there are some differences to keep note of. For many, Cash App is already a household name, so the switch from Credit Karma Taxes to Cash App Taxes might have been a smooth process. Despite all of the pros that come from using Cash App Taxes, there are still plenty of cons to keep understand before using. In this article, we will analyze everything related to Cash App Taxes so you can be as informed as possible when it comes to using the app.
How does Cash App Taxes work?
In order for users to file their taxes through Cash App Taxes, they must either download the app or visit the desktop website. From there, users can begin entering their information to begin filing. It is important to keep in mind that you must be considered eligible to file with the app before you continue. Here is a list copied directly from Cash App that defines what forms and situations they would not support:
Form or situation
What it’s for
Earned Income Credit with Non-Dependents
You want to claim a qualifying child who is not your dependent for purposes of claiming the Earned Income Credit.
Clergy member tax filings (e.g., ministers or pastors)
Members of the clergy can take advantage of special tax rules and exemptions.
Schedule J, Income Averaging for Farmers and Fishermen
You want to average your fishing or farming taxable income over the previous 3 years.
Schedule K-1 – Estate and Trust income
Received a K-1 from an estate or trust for the tax year.
Form 1040NR – Nonresident alien federal tax return
Generally for nonresident aliens of the U.S. engaged in a trade or business in the U.S.
Form 1116 – Foreign Tax Credit
Allows you to claim a credit for certain foreign taxes accrued or paid to a foreign country or U.S. possession.
Form 2555 – Foreign Earned Income
This form determines your foreign earned income exclusion and your housing exclusion or deduction.
Form 2210 – Underpayment of Estimated Tax by Individuals, Estates, and Trusts
You didn’t withhold or pay enough taxes during the tax year. If you’re unsure if this form applies to you, the IRS provides a flowchart at the beginning of the form to help you determine if you need to file this form.
Form 3468 – Investment Credit
The form allows you to claim an investment credit which consists of the rehabilitation, qualifying advanced coal project, qualifying advanced energy project, energy, and qualifying gasification project credits.
Form 3800 – General Business Credit
This form is used to claim any of the general business credits.
Form 4136 – Credit for Federal Tax Paid on Fuels
Allows you to claim a biodiesel or renewable diesel mixture credit, alternative fuel credit, etc.
Form 5884 – Work Opportunity Credit
This form allows you to claim the work opportunity credit for your business when certification is received from the state workforce agency (SWA).
Form 6478 – Biofuel Producer Credit
Use this form to figure your section 40 biofuel producer credit for the tax year in which the sale or use occurs.
Form 7202 – Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals
You had sick leave or family leave and you’re self employed.
Form 8332 – Release of Claim to Exemption for Child by Custodial Parent
Releasing a claim to an exemption for your child so that a non-custodial parent can claim it, or revoking a previous release of a claim to a child exemption.
Form 8586 – Low-Income Housing Credit
This general business credit is allowed for each qualified low-income building placed in service after 1986 and is generally taken over a 10-year credit period.
Form 8615 – Tax for Certain Children Who Have Unearned Income
Required in certain situations where your child had unearned income of less than $2,300 for the year.
Form 8824 – Like-Kind Exchanges
You report each exchange of business or investment real property for real property of a like kind. You would also use this form to report a deferral of gain from section conflict of interest sales.
Form 8834 – Qualified Electric Vehicle Credit
This form only applies to qualified electric vehicle passive activity credits from prior years (allowed on Form 8582-CR or Form 8810 for the current year). The qualified electric vehicle credit was available for certain vehicles placed in service before 2007.
Form 8864 – Biodiesel and Renewable Diesel Fuels Credit
You want to claim credits for biodiesel and renewable diesel fuels sold or used in the tax year.
Form 8885 – Health Coverage Tax Credit
You want to claim the Health Coverage Tax Credit.
Form 8903 – Domestic Production Activities Deduction
For large and small businesses, or other eligible individuals or entities, who produce their goods or work in the United States.
Form 8941 – Credit for Small Employer Health Insurance Premiums
Eligible small employers use this form to figure the credit for small employer health insurance premiums for tax years beginning after 2009. The credit may be reduced by limitations.
What happened to Credit Karma Taxes?
One question you might ask yourself is what happened to the previous service, Credit Karma Taxes? As we mentioned before, millions of users used this service to file for their taxes before Cash App Taxes became a thing. Back when Cash App first purchased the service, there was a period where users could still log into their Credit Karma accounts to use Credit Karma Taxes. This is no longer the case, however, and Credit Karma Taxes is no longer an accessible service.
Now the question might be, what about user’s previous tax returns? Now that Credit Karma Taxes is no longer a service that you can access, what happened to user’s tax returns they previously filed with it? As of this month, anyone who filed with Credit Karma Taxes previously can view and download their tax returns on the Cash App Taxes app. For those who filed, but don’t have a Cash App account, they will have to contact Cash App Taxes Support. This unfortunately might be a bit of a tedious process, so many people will likely create a Cash App account.
What does Cash App gain from this service?
It might be confusing why Cash App is offering a completely free service for filing your taxes. As a corporation, it might seem like they are losing money by giving users a way to file for free, but this is far from the case. While the service is 100% free, there is still the fact that users who use it are using Cash App. Cash App doesn’t run ads on the app, so funds mostly come from the percentage they take from money transfers and the profits of their other services.
It’s important to remember that Cash App is one of the largest peer-to-peer money transfer services on the market, so adding a free service is actually very beneficial to them. Having a new service gives room for new users to download the app. This is especially true of a service as necessary as tax preparation.
Cash App might have the service free right now, but there’s no telling what could change. It’s unlikely they’ll get rid of the current system, but adding a paid premium service isn’t out of the question. Right now, Cash App Taxes only offers personal taxes, so businesses cannot really use the service. If Cash App were to introduce business taxes, due to their nature, they would likely end up charging for them. There’s also the many forms and taxes that Cash App doesn’t support. If they found a way to actually support them, they might end up charging for those as well since they’re harder to file. This is of course just speculation at this point, but if we compare similar tax preparation services, they often end up going down a similar path.
Is Cash App Taxes trustworthy?
Since its introduction, Cash App has become a household name when it comes to money transfer services. Whenever you need to quickly send money to a friend or relative, Cash App is often one of the first options people think to use. The question of whether or not the service is trustworthy might seem like an instant yes, but there are some things to keep in mind when it comes to the company.
In 2021, Cash App had a data breach that leaked the personal and financial information of 8.2 million users. The reason for this breach is believed to have been due to negligence from Cash App and its parent company, Block. As a result of this, there is currently a class action lawsuit against the two companies.
There are an estimated 40 million Cash App users, so this data breach didn’t affect everyone, but it should still leave some concern as far as security goes. Since it’s a money transferring service, a data breach has the potential to result in the theft of millions of dollars. It should come as no surprise that not everyone would be willing to trust a company with their tax information after such a widespread breach. Regardless of the outcome of the lawsuit, one would hope that Cash App is able to provide a much more secure service for future users.
Should I use Cash App Taxes?
Now that we have thoroughly reviewed Cash App’ Taxes, you might find yourself still on the fence on whether or not you should use it. The answer to this question isn’t that simple, as there are many factors that go into filing taxes, and not everyone values the same things. If you are someone who prefers to file their taxes themselves, it might be worth looking into Cash App Taxes. A free service might just end up helping you speed up the process a little more.
If you’re not used to filing your taxes yourself, Cash App Taxes is probably not a good idea for you. While the app might do a decent amount of the work on its own, you are still left on your own to do a lot of the work by yourself. Cash App offers an FAQ page with some answers, but if you have a more complicated question, you might end up getting stuck waiting for a response from their support.
Keep in mind that it also might not be possible for you to use Cash App Taxes, as they have an extensive list of forms and situations they do not support.
Having professional help with tax preparation is always a plus, so feel free to contact us here at Jacobwise for assistance. We would love to help you get through the process!