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What's the catch when it comes to a ‘free' tax prep site?

Report raises questions about value of privacy

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When it comes to filing your taxes, especially online, you have what can feel like a million options.

Some companies, such as Intuit TurboTax and H&R Block, offer some sort of “free” package -- mostly to try and get you to upgrade: If you pay a little extra, typically just $50 to $100, the website will make the filing process much easier on you.

Other companies will let you file for free, as in, they’re not going to try to upsell you on a fancier package. But as a recent article in The Washington Post asks, what’s the price of free?

Meaning, what are you giving up in order to file free of charge?

The story looks largely at the website Credit Karma, and says if you use the site, you might be paying with your privacy.

Credit Karma CEO Kenneth Lin spoke with the Post about how the site operates.

“One reason Credit Karma got into the tax game, (Lin) said, is because it rounds out the data it needs to determine when customers might be eligible for, say, a new personal loan,” the story reads. “Credit Karma can make between tens and hundreds of dollars each time someone accepts one of its loan or card offers — and the more accurately it can target us, the more money it makes.”

Below is a screenshot from Credit Karma, explaining how the whole thing works:

And yes, this is the same Credit Karma site you’ve likely heard of, as it’s perhaps best known for doing what its name implies: providing people access to their credit scores.

But when it comes to tax services, Forbes once described Credit Karma as “Big Brother with benefits.”
The site doesn’t make money by selling data, but it does so another way.

“Its business is selling access to you through highly targeted offers on its website, which provides advice on how you can improve your credit,” the Post said. “Marketers waste money mailing card offers that we don’t want or can’t get approved for and have flocked to advertise with Credit Karma instead.”

So before you jump on board with ANY site that claims to be free, tech columnist Geoffrey A. Fowler recommends asking the following questions:

1. What information is being used?
2. Who is it being shared with?
3. How secure is it?
4. How long are they holding on to it?

It’s not that any of these sites are doing anything illegal. Many internet companies store your information and use it in all sorts of ways -- it’s just that Credit Karma and similar sites are taking in your extremely sensitive data: income information, mortgage details, Social Security numbers, etc.

And just like most stories you read online, there are no final answers or definite recommendations here: It’s all just more information to be aware of.

If you’ve used Credit Karma for taxes in the past, and you decide to shut your account, it could take up to two years for the company to delete your data entirely. When you consent in the first place, Credit Karma has the legal right to use your data for 10 years, the Post added.

Ten years is a long time.

Going forward, it might be worth asking yourself: Is it worth it, paying a little extra to keep your data secure?


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