Karen Taylor arrived in Genoa City as Nikki Newman's campaign manager during Nikki's State Senate race against Jack Abbott. Karen was the ultimate professional and would not stand for any dirty tricks. Jack's campaign manager David Chow was the exact opposite, and he pulled every trick he could come up with to try to discredit Nikki, including the fact that she was an ex-stripper and trying to publish photos from Nikki's pornographic movie titled "Hot Hips". Karen got an injunction to keep the photos from being published, and asked Nikki's best friend Kay Chancellor to publicly support her to help Nikki regain her credibility. Jack fired David for going too far with his attacks on Nikki, and Nikki turned around and hired him as a consultant, deciding she needed his tactics to fight Jack.

In exchanges between Karen and David, it was obvious they didn't like each other. Karen had worked with David Chow at Granville Global (a company that Newman had recently acquired), and they also worked a campaign together in Columbus, OH, where David disgraced their candidate by having an affair with the candidate's wife. And now David was making moves on Nikki. Karen warned him to lay off until after the election, and made sure that she was with them whenever they were together to avoid speculation which would expose David's shady past. But David and Nikki got closer, and Jack's camp leaked a video of them kissing.

Karen is an expert kick-boxer, often showing up at the Genoa City Athletic Club gym both showing up the guys and catching their eye. Brad Carlton seemed interested in her for awhile. They worked out together, but nothing ever came of it. She has even held her own with Victor and Neil with boxing gloves.

On election day, Karen met Neil Winters who helped her after she locked her keys in her car, and they began dating. After the campaign was over and Jack won the Senate seat, Neil asked Karen to take his deceased wife's job at Newman Enterprises. They clashed when Karen changed Dru's marketing plan and Victor supported her. Neil apologized, realizing he was overly sensitive to anything concerning Dru including when Karen turned up with one of Dru's hats they had donated, liking the same movies as Dru did, etc. When Newman got involved in the Clear Springs Development Project, Karen was in charge of public relations.

Neil's children Devon and Lily had a hard time getting past his "disrespect for Dru" but came to accept Karen when they celebrated Thanksgiving together and realized she was a great person with family traditions too, like her chicken adobo. By Christmas, they were happy to invite her themselves. Neil caught Karen singing at the piano at Indigo, and told her how good she was, encouraging her to sing at the club. Karen had terrible stage fright, but Neil lovingly got Pat Benatar to help her overcome it. She taught Karen a trick, then Karen sang fearlessly at the club. After her debut, Neil told Karen that he loved her and asked her to marry him. She said she didn't think they were ready, but agreed to move in with him, and realized she was right when she found herself surrounded with all of his deceased wife Dru's things and Neil's memories.

Lily got busy into her modeling career under the tutelage of Chloe, working long hours on her cover shot for the launch issue of Restless Style online/print magazine, flunking out of college, not eating due to pressure from Chloe about her figure, only to discover she was pregnant by Cane. After much indecision, Lily told Cane and her father. Then after going to her mother's old ballet studio to feel close to her mother, Lily decided to have the baby. Later Cane staged a lovely marriage proposal at the same studio, but Lily was hesitant to say yes, afraid he wanted to marry her for all the wrong reasons. Meanwhile Neil was making plans to raise Lily's baby with Karen, without consulting Lily, Cane, nor Karen beforehand - causing Karen to feel disrespected and move out. She quit her job at Newman and prepared to move to New York to work for a romance novel publisher. But when Cane & Lily went for the first ultrasound, it was discovered that there was no more baby. It had dissolved on its own due to imperfection. Cane and Lily were devastated, and Karen was great consoling Lily, and Kay & Jill in consoling Cane.

After a time Neil regretted his treatment of Karen, called her, then showed up at her apartment in New York. He asked her to return, then asked her to marry him, but she turned him down, and Neil returned to GC alone. Thought not long afterward, Karen showed up in Genoa City, had to beg Adam who was now in charge at Newman for her job back, and Karen and Neil resumed dating.

Karen became good friends with both Lily and Victoria through their troubled pregnancies and admitted that she would have loved to have about 5 kids, but couldn't. Karen lost her mother to ovarian cancer when she was 12, was taken from her family to live with an aunt and uncle in another town, then took care of her ailing father, and went through a long relationship that went nowhere, so never did. Later she had a hysterectomy to prevent inheriting the same cancer, and knowing how much Neil loved kids, wasn't sure how to tell him.

During a surprise 21st birthday party for Lily, Devon's Aunt Tyra and precocious and talented 12 year old Ana arrived from Seattle. Cane could see they didn't have money for a hotel, so paid for one, but Neil was highly suspicious of their motives for coming to town, especially after they found out Tyra lost her job managing the Pembrooke Inn in Seattle, and was evicted. But Tyra was honest about her circumstances and Neil wanted his son to get to know his real family, so soft-hearted Neil invited them to live with him and Karen until they got back on their feet. As weeks went on, Karen was not pleased with this, and asked Tyra to look for her own place, but Neil nixed the idea. Ana had a beautiful singing voice, but was afraid to sing in public. Thanks to Karen relating her mutual stage fright, Ana began singing for the family at Indigo and then with Devon at the annual charity gala which prompted Kay Chancellor to offer her the annual scholarship for gifted students to a Music School in New Hampshire. Tyra was reluctant to accept because Ana was not really her daughter, but the daughter of her crack head sister Yolanda, so she was afraid her deception all these years would be exposed. Neil was supportive, and Kay paved the way for Ana to get into the school regardless. Even Devon was unaware that he had a sister. Tyra explained that when Devon was a child living with his grandmother, Yolanda came home pregnant from one of her many disappearances and Tyra, who was only 15 and living with her father (Devon's grandfather), raised Yolanda's baby who was Ana. Devon and Ana get along wonderfully as they are both interested in music, writing and singing together.

A few months later Katherine got word that Ana had left her school. Neil and Devon tried to contact them and found Tyra had given up their apartment. Then they both arrived in Genoa City again by train on the way back to Seattle. Tyra told Neil that things just didn't work out in New Hampshire, the rent was too high and pay too low. Neil pointed out that she had nothing to return to in Seattle. Tyra agreed to stay and take back the manager job at Indigo, once Devon offered to share his house with them so they didn't have to impose on Neil and Karen.

In October 2008, Lily went to visit her Aunt Olivia in New York City while she was lecturing there for Doctors Without Borders, and returned to Genoa City with her. Olivia mentioned that her son Nate was now attending Johns Hopkins University Medical School. She was surprised to learn that Neil's current flame Karen was a former patient of hers in New York City. Neil asked Karen to marry him but before she would accept, she explained about her inability to have children. Neil understood and they became engaged. Much as Olivia liked Karen, after meeting Tyra and seeing how much chemistry she and Neil had, she advised Neil that he was marrying the wrong woman. Tyra may have gotten over her attraction to Neil once she started dating Detective Gil Wallace. But Gil spotted Ana on a missing person's bulletin put out by Yolanda, and had to confront them to take Ana to a foster home until her custody can be straightened out. Billy Abbott got his young attorney friend, Rafe Torres, to take the case, but Yolanda has further complicated things by disappearing. Meanwhile Neil renewed his foster care license and he and Karen decided to marry earlier than planned to help them get custody of Ana. Their wedding was held New Year's Eve 2008 at Indigo with Victoria as Matron of Honor and Victor arriving last minute to be Neil's Best Man, with Olivia still hoping Tyra would interrupt the wedding by declaring her love for Neil. Neil and Karen went to court the next day and custody of Ana, but with the restriction that Tyra could only see her during supervised visits. Ana was thrilled to be back with family, but Tyra was crushed.

Karen became so attached to Ana that she wanted to legally adopt her, much to Tyra's opposition. Rafe got the courts to terminate Yolanda's legal rights to Ana, and Tyra celebrated by telling Neil how much she cared for him and kissed him - which of course Karen secretly witnessed. In retaliation, the next day Karen told Tyra that their adoption of Ana was in the works with Neil's blessing, so Tyra took Ana and attempted to flee Genoa City. Neil found them, thanks to Ana's tipping him by cell phone. When the police arrived, Neil told them that they were there with his permission. When Neil confronted Karen about provoking Tyra to run away, she confronted him about his kiss with Tyra. Karen told him it was time for him to get his priorities straight if he still wanted her in his life, and that meant firing Tyra. Neil agreed, but telling Tyra ended up in a sexual encounter in the middle of the empty Indigo. Devon walked in and saw them and later confronted Neil, asking how this happened and why he was risking his marriage and family. Neil later admitted his sexual encounter with Tyra to Karen who forgave him, afraid that it would hurt their adoption of Ana. But in court Neil convinced the judge to give sole custody of Ana to Tyra because she deserved her after raising Ana so well all these years. Karen was so devastated, she accused Neil of using her to get over Dru, and left him, leaving her wedding ring behind. Karen showed up again at Indigo during the pre-wedding party for Lily and Cane with divorce papers for Neil to sign, catching him dancing with Tyra. He reluctantly signed.