Square, on behalf of its financial services app Cash App, has signed a deal to acquire Credit Karma Tax, the tax business of personal finance company Credit Karma for $50m in cash.
Credit Karma Tax enables users to file state and also federal tax returns in the US without any charges.
For Cash App, the acquisition gives an opportunity to further digitise and simplify the process of tax filing in the US. Besides, it will increase access to the one in three households that either do not have banking accounts or are underbanked, stated Square.
Credit Karma Tax will also enlarge Cash App’s ecosystem of financial tools, which include peer-to-peer payments, Cash Card, direct deposit, and fractional investing in stocks and bitcoin.
Cash App lead Brian Grassadonia said: “We created Cash App to provide more access to the masses of people left out of the financial system and are constantly looking for ways to redefine our customers’ relationship with money by making it more relatable, instantly available, and universally accessible.
“That’s why we’re thrilled to bring this easy-to-use tax product to customers as we continue to build out the suite of tools Cash App offers. With this acquisition, we believe Cash App will be able to ease customers’ burden of preparing taxes every year.”
For Credit Karma, the sale of its tax business is being taken up to fulfil the condition put up by the US Department of Justice (DOJ) for the approval of its $7.1bn acquisition by Intuit.
The condition was set by DOJ as Intuit owns a similar digital tax filing service called TurboTax. However, unlike Credit Karma Tax, Intuit’s TurboTax is a paid service.
DOJ Antitrust Division Assistant Attorney General Makan Delrahim said: “Intuit’s TurboTax has long led the market for digital do-it-yourself tax filing services, but disruptive competition from Credit Karma Tax has brought substantial benefits to American taxpayers.
“Today’s divestiture to Square, another highly successful and disruptive fintech company, ensures that taxpayers will continue to both benefit from this competition and benefit from new innovative financial service offerings from both Intuit and Square.”
The deal is subject to the closing of Intuit’s acquisition of Credit Karma among other customary conditions, and is expected to be wrapped up by the year end.
