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Consumers pay for free tax preparation sites with personal data

Price of free tax prep
Price of free tax prep 01:50

NEW YORK -- As the deadline for most Americans to file their taxes nears, millions of consumers are turning to companies like H&R Block or Credit Karma, which offer free tax preparation.

One such consumer is Katherine Currier, who used TurboTax.

“It was very simple,” Currier said. “It really only took me like 15, 20 minutes.”

Companies provide free tax filing because of what they can get in return: access to consumer data, which helps them market services like credit cards and loans. 

Credit Karma CEO Kenneth Lin CBS News

“Credit Karma makes money when we’re able to help a consumer find a better product,” said the company’s CEO, Kenneth Lin.

“The information from the tax return can be pivotal in understanding if you’re overpaying for a particular loan product or you’re taking a deduction that you shouldn’t,” Lin said.

All the tax preparers CBS News spoke to say they do not sell consumers’ private information to third parties.

How tax credits can save money 01:10

But some do use it for themselves, and sometimes their partners, to sell financial products like refinancing a mortgage, which they get a commission for. Those companies that share the information also said that they ask for the consumer’s consent before doing so.

However, consumer advocates worry sensitive information -- like a filer’s income, deductions and number of dependents -- could be misused.

“There is no free lunch and that’s the same with free services. That’s always the price you’re paying,” said Susan Grant with the Consumer Federation of America. “The problem is here that it’s all invisible to you. It’s really not clear what information about you is being collected or how it’s being used.”

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