Tax Season 2019 -Paying with Privacy

A lot of stuff online is free. Too much stuff really. So what are you getting, or giving, when you use a free tax prep services? Let me answer that. You get a free online tax prep and filing. You’re giving up your financial privacy.

Now ask yourself how are these free services making money by giving away free services. They get your financial information for free and turn around and use it to advertise to you.

Credit Karma is one service where you pay with your privacy. Credit Karma Tax has been around since 2017 and is an extension of the credit score website currently being used by nearly 90 million people. The service is free, but not so free. You don’t pay even if your returns requires more complicated IRS forms. But Credit Karma makes money by focusing on you with tailored ads for credit cards and loans. All based your financial life, which includes your tax returns. And yes, you can opt out. And yes, advertising to you based on the financial data you provided is legal.

Kenneth Lin, CEO of Credit Karma Credit openly admits to the business model. According to Lin Credit Karma offered the free service to complete the data needed to determine if a customers is eligible for loans or other financial services. Credit Karma can make hundreds of dollars each time someone accepts an offer for a loan or new credit card. And yes, the more accurately it can target users, the more money it makes. See, this free tax prep thing is all about gathering data.

“We’re gathering information on behalf of the users,” said Lin. “We help consumers find the very best financial services products leveraging the information algorithms on our site.” Credit Karma was once described by Forbes as “Big Brother with benefits.”

So you don’t think we’re picking on Credit Karma you need to understand that they are not the only service using this business model. You can bet that Intuit’s TurboTax and H&R Block are doing something similar.

Credit Karma admits to moving your income data from its free tax prep service to bolster its personal loan business. It is not currently using information about your refund but neither is Credit Karma imposing restrictions on future tax return data. But you can take small comfort in the fact that the IRS prohibits the selling of your tax data without your explicit permission.

So beware. Anytime you surrender information for something free you are no longer the customer, you become the product. In this case you become a target of data driven advertising. Free is not free.