Beware of Free Tax Return Services

Want to file your taxes online for free? Who wouldn’t want that (assuming your tax situation allows for it)? Credit Karma is the newest kid on the block of free online tax preparation. But a recent Wall Street Journal story pointed out the perils of using Credit Karma. It seems “free” may not really be free after all.

Credit Karma has over 60 million users who came to it for free credit information. Now they are seeking further growth by going after people who want to file their taxes for free without using desktop software or a paid preparer. And it can work, by all accounts, as long as you make all the right decisions and opt out of everything you can.

According to the Wall Street Journal, Credit Karma is trying to collect your financial information to sell to third parties. They want to allow third parties to sell you credit cards and other financial products. They quote a couple from California who were happy with their tax services – right up until they got a request from their credit card company to update their income. They canceled their membership immediately.

Credit Karma said you are allowed to opt out of sharing your data with third party companies. The couple mentioned above did not know that. It also said it does not sell personal information, and it does not charge for the solicitations from third parties. I am unsure exactly what that means. They claim they only get paid if you sign up for one of the products you will be offered.

In order to use their free tax filing service, you will also have to become a member of Credit Karma and provide them with certain information, like your address, date of birth, mobile phone, and the last four digits of your social security number. And you may find you have to pay additional charges if you need additional help. Not everything is free on their site.

For what it’s worth, Intuit (Turbotax Online) said it never shares any customer data with a third party without your consent. They are the industry giant, and H&R Block is second.

Our advice – go ahead and use Credit Karma if you like, but be sure you know ahead of time what information they can and can’t share with third parties. Spend some time reading their privacy policy before you just dive in. And opt out if you are able.

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