Did you use Credit Karma Tax to prepare your tax return in 2021? Expect to see changes for the coming tax-filing season as Credit Karma Tax no longer exists.
In November 2020, Square, Inc., the parent company of the financial services app Cash App, announced an agreement to acquire Credit Karma’s free do-it-yourself tax filing service. But why did this happen? And what does this mean for current and former Credit Karma Tax (CKT) customers? We have your answers.
Why Did Credit Karma Tax Become Cash App Taxes?
First, a little history. In February 2020, Intuit, Inc. said it would buy privately held Credit Karma. The purchase allowed Intuit, maker of the DIY tax software giant TurboTax, to further expand into consumer finance and access financial data on Credit Karma’s 100 million members in the U.S., U.K. and Canada.
The U.S. Justice Department (DOJ) effectively said, “Not so fast,” when it filed a civil antitrust lawsuit in U.S. District Court to block the transaction. According to the suit, unless Credit Karma divested its tax business, the acquisition would eliminate competition and likely result in higher prices, lower quality products and services and less consumer choice for digital-do-it-yourself tax preparation.
In 2019, around 1.5 million people used Credit Karma Tax to file their taxes. That accounts for a small fraction of the 34 million consumers who use software to prepare and file tax returns each year.
However, the DOJ generally views any merger that gives a company control of more than 70% of the market as a potential monopoly. As Intuit already controls roughly 67% of the DIY tax preparation market, buying CKT would push them closer to that threshold.
As part of a proposed settlement with the DOJ, CKT entered into a deal with Square, Inc. to sell its tax business. Square plans to integrate CKT into its Cash App platform, giving Cash App the ability to offer free tax filing services.
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