Credit Karma may sell tax-prep business to Square amid US antitrust scrutiny: WSJ

October 30, 2020.
Intuit CEO Sasan Goodarzi and Credit Karma Founder and CEO Kenneth Lin seen at Intuit Headquarters on Thursday, Feb. 20, 2020 in Mountain View, Calif. (Alison Yin/AP Images for Intuit)

Intuit CEO Sasan Goodarzi and Credit Karma Founder and CEO Kenneth Lin seen at Intuit Headquarters on Thursday, Feb. 20, 2020 in Mountain View, Calif. (Alison Yin/AP Images for Intuit)

Personal-finance firm Karma is in talks to sell its tax-preparation unit to to ease federal antitrust concerns over its pending $7.1 billion buyout by TurboTax operator , The Wall Street Journal reported Friday, amid increased regulatory scrutiny of fintechs. 

The Department of Justice, which can either approve or deny the acquisition, has concerns for whether removing ’s -filing services from the market would leave taxpayers with fewer and possibly more expensive options, people familiar with the matter told the newspaper. The Journal said it could not learn the terms of a potential deal.

In recent months, Credit Karma has been searching for buyers based on government feedback with “the financial wherewithal and strategic vision to grow tax businesses,” people familiar with the matter told the Journal. Fellow San Francisco-based fintech company Square appears to meet those standards.

Credit Karma and Square did not immediately respond to a request for comment.

Credit Karma, which most notably provides free access to users’ credit scores, first entered the tax-preparation business with its 2016 acquisition of AFJC Corporation, which previously operated the websites OnePriceTaxes and Tax Preparer Solutions before being rebranded as Credit Karma Tax. The fintech company operates the tax-filing service for free and instead gathers user data to sharpen its targeting for credit cards and personal loans.

In February, Intuit announced its plans to buy Credit Karma for $7.1 billion in its largest-ever acquisition, which would remove a competitor to its dominant tax-filing service TurboTax.

The pending deal caught the attention of the Department of Justice, which privately questioned its competitive effect on the free tax-prep market and requested more information from the companies, ProPublica reported in August.

An Intuit spokesperson told the nonprofit news outlet, “This combination is not about tax. We are confident in the clear consumer and competitive benefits of our combination and look forward to continued engagement with regulators.”

The antitrust scrutiny faced by Intuit coincides with the Justice Department’s recent aggressive actions against tech firms, targeting what it deems to be anticompetitive behavior. The department sued Google earlier this month for allegedly maintaining its internet-search and search-advertising monopolies unlawfully. It is also preparing potential litigation and lining up witnesses over ’s pending $5.3 billion purchase of fintech startup , The Wall Street Journal reported Tuesday.

ProPublica has also reported on ways Intuit has obfuscated its free version of TurboTax for lower-income U.S. citizens, such as by deliberately hiding it from Google search results, hosting it on a website other than turbotax.com, and labeling other services as free despite embedding paid services within them.

Intuit and other providers of tax-prep services have agreed with the U.S. to provide these free services in return for the federal agency not developing its own.

Saving