![]() Disheartened By The Changes at Credit Karma? You Have OptionsĬredit Karma’s acquisition and the potential loss of their tax product may leave you feeling disillusioned with using them for your credit-checking needs. ![]() Square brought in $1.89 billion in gross profit across its properties last year. Square is primarily a payments processor for small businesses, but it also runs peer-to-peer money transfer platform Cash App. It’s not clear whether or how Square will monetize the tax service, but it would provide a new entry point to the personal finance space for the company. The DOJ began to investigate the merger this summer and the investigation prompted Intuit to consider separating out Credit Karma’s tax service to be run by a separate company. While Credit Karma represents a small fraction of the tax preparation market-in 2019, about 1.5 million people used their software to file their taxes-Intuit’s acquisition of a growing competitor could push them ever closer to that monopolizing 70%. Any merger that gives a company control of more than 70% of the market may make it a monopoly, according to DOJ regulations. Intuit controlled 67% of the DIY tax preparation market in 2019, according to IRS data analyzed by ProPublica. In an April letter to the Department of Justice (DOJ), Senator Ron Ryden (D-OR) requested that the antitrust division investigate the acquisition, claiming it would reduce the options for people seeking to prepare and file their taxes online. The acquisition also raised antitrust red flags. While both companies said Credit Karma would continue to operate independently of Intuit’s other products, skeptical lawmakers raised concerns that Credit Karma’s free tax prep service would become a paid one, putting it out of reach for many Americans. Intuit also owns QuickBooks accounting software and budgeting app Mint. Intuit’s TurboTax has come under scrutiny in recent years for directing consumers away from free filing services they may be eligible for and toward its premium tax-preparation services. In February 2020, Intuit announced it would buy Credit Karma for $7.1 billion. ![]() “This always-free business model has enabled Credit Karma Tax to compete aggressively for filers who pay for TurboTax, which helps constrain TurboTax prices and push Intuit to improve TurboTax offerings,” the department’s announcement explained. While Intuit, which operates TurboTax, has long led the market for tax preparation products, Credit Karma’s free tax prep platform gave the landscape some healthy competition, the Department of Justice said. More than 34 million people used software to prepare and file their taxes last year. Intuit’s acquisition of Credit Karma was questioned for potentially creating a tax preparation monopoly, meaning it reduces competition and leaves consumers with fewer tax filing options in what is an $11 billion dollar industry. Why Intuit Buying Credit Karma Was a Problem But until the sale of the service to Square is final, it’s unclear what free DIY options consumers will have available next spring. The ruling to block Intuit from purchasing Credit Karma’s tax service needs to be approved in court. Other tax services typically only offer free preparation to filers below a certain income level, by participating in the IRS Free File program. It was a notable player on the scene for offering its services for free. The Department of Justice simultaneously announced a suit to block the merger and a settlement approving a solution: by divesting Credit Karma Tax to Square, Intuit can avoid violating antitrust regulations.Ĭredit Karma, which got its start offering consumers free access to their credit scores and reports (the trade-off is that they advertise product recommendations to users), started offering tax preparation services in 2017. This follows the February 2020 announcement of Credit Karma’s acquisition by tax software giant Intuit. Credit Karma is about to have a new owner, but its free tax preparation service won’t be coming along for the ride.Ĭredit Karma will sell its tax-prep operation to Square Inc., according to the Justice Department announcement.
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