[the-facts-machine] Free tax prep is hard to resist, but you should know the cost to your privacy
- From: Steve <pipeguy920@xxxxxxxxx>
- To: <the-facts-machine@xxxxxxxxxxxxx>
- Date: Mon, 11 Mar 2019 19:59:03 -0400
Blank
Goes to prove Milton Friedman's famous saying "there ain't no such thing as a
free
lunch!"
Steve
Free tax prep is hard to resist, but you should know the cost to your privacy
.
Geoffrey A. Fowler.
Nothing is certain except death, taxes . . . and tech companies making grabs
for your
data. So this tax season, I started asking why, exactly, all those "free"
online tax
services are free. One used by more than a million Americans had an alarming
answer:
Credit Karma Tax takes the intimate details of your tax returns - like how much
you
earn and pay for your mortgage - to target you with financial advertising. I
know,
it's hard to argue with free. But for too long, we've been letting free
technology
blind us to a really important question: How is somebody going to make money
from
this? In Silicon Valley, an adage goes, "If the product is free, that means
you're
the product. You probably already suspected that products such as Intuit's
TurboTax
and H&R Block offer limited free service as bait to sell you fancier paid
services.
Then there are a dozen free, no-upsell services run pro bono by the tax-prep
industry - but only for people who earn less than $66,000 per year. (Dubbed
"Free
File," these services are often buried; you can find them linked directly on
the
Internal Revenue Service website.) A third kind of free tax prep, offered by
Credit
Karma, is blazing a new path: paying with your privacy. Available since 2017,
Credit
Karma Tax is an extension of the credit score website that's used by 85 million
people. The tax service is really free - even if you use complicated IRS forms.
It
makes money by showing you tailored "offers" for credit cards and loans based
on a
profile of your financial life, which includes your tax returns unless you
adjust a
setting to opt out. It's a bold grab for personal data. It's entirely legal.
And it's
already inspiring other free services that want to target advertising using tax
data.
Credit to Credit Karma's chief executive, Kenneth Lin: He spoke openly with me
about
his business. One reason Credit Karma got into the tax game, he said, is
because it
rounds out the data the company needs to determine when customers might be
eligible
for, say, a new personal loan. 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. "We're gathering
information on
behalf of the users," he told me. "We help consumers find the very best
financial
services products leveraging the information algorithms on our site. As Forbes
once
described Credit Karma, it's Big Brother with benefits. There's a fine line
between
useful and creepy with surveillance. For some, Credit Karma's offers might be
acceptable, even time- and money-saving. To me, Credit Karma Tax is taking a
business
idea that hasn't worked out well for us with Facebook and applying it to even
more
sensitive information. To really understand what free costs, you have to follow
the
data. Show me the data Taped on my desk are four questions I've learned to ask
any
business that wants my data: 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? They
bring
some clarity to the exchange we make with Credit Karma for free tax prep. It
uses
perhaps the most intimate personal data outside of health records. No one needs
reminding of that - President Trump has gone to great lengths to keep his taxes
private. While credit bureaus and data brokers already collect information
about your
finances, some details are hard for that industry to come by, such as your cash
flow,
mortgage deduction and savings yield. Today, Credit Karma says it is using
income
data from customer tax forms to inform its personal loan business. It isn't, so
far,
using information like who's about to get a big refund or bill - but Credit
Karma
also hasn't imposed any limits on tax return data it could use in the future.
You do
get the opportunity to opt out of syncing up your tax returns with the other
data the
company uses to target ads. Credit Karma won't say how many people choose to
opt out,
and its software doesn't present it as a choice about privacy. So who does
Credit
Karma share your data with? "We don't sell data. We don't broker data. We don't
work
with hedge funds. We're squarely focused on creating a great user experience
and
being a trusted adviser," Lin said. This is required, in part, by law. The IRS
prohibits tax preparers from selling or sharing taxpayer data without express
consent. Credit Karma, like Facebook, doesn't need to sell data to make money.
Its
business is selling access to you through highly targeted offers on its
website,
which provides advice on how you can improve your credit. 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. Lin disagreed with my Facebook comparison.
"We're not letting advertisers target you. What we're actually doing is finding
the
products you are eligible for in the financial services market," he said.
Credit
Karma is not doing some of the things we've come to dislike about Facebook. It
doesn't have a system for third parties to access data, and advertisers have no
way
of retaining your data (unless you permit Credit Karma to pre-fill a loan or
credit
card application for you). Credit Karma is doing the things lots of other
Internet
companies do - just with a much more sensitive type of data. How secure is your
tax
data with Credit Karma? In 2014, before it had a tax service, Credit Karma did
get in
trouble with the Federal Trade Commission for not securing its app, potentially
putting credit card details and Social Security numbers at risk. It says it has
fixed
that now, offers security protections such as two-factor authentication and
pays
ethical hackers to look for flaws. Credit Karma says it has never suffered a
data
breach. Better hope it stays that way. When you consent to sync up your tax
return in
its marketing system, you give Credit Karma the legal right to use the data for
10
years. That's forever for a start-up, during which time management could decide
on
new uses for your data. If you decide to shut your account, the company says it
can
take up to two years to delete your data entirely, due to regulatory
requirements. A
page on Credit Karma's website explains its business model, a move more free
online
services should emulate. Paying in privacy That's what you're giving up. Is it
worth
it? Assuming you don't qualify for one of the Free File services, doing taxes
online
might cost $50 to $150. My privacy is worth more than that, especially given
the
open-ended and long-term potential uses Credit Karma has for my tax data.
"Being able
to file your taxes in a safe and easy way is a good value proposition," Lin
said. You
could use Credit Karma Tax and click that opt-out box. But Lin says that
pulling all
your data into one place is a big part of the site's value. "If financial
services
companies are going to be leveraging this information, let us tell you how you
can
get ahead in that system," he said. People who use the offers picked by Credit
Karma's systems not only get better rates, he said, but also end up doing less
damage
to their credit scores applying for financial products they can't get. Those
arguments make some sense when it comes to bringing transparency and control
over the
shadowy world of credit reports. But why add tax returns to tech company
dossiers on
us? The solution to a world where too much data is being collected is not more
surveillance. Silicon Valley is taking inspiration from Credit Karma's model.
When
TurboTax users finish doing their taxes, some now get a prompt to import their
data
into a sister site named Turbo, launched in 2018. Run by Intuit independently
from
its tax prep software, Turbo also uses financial data to generate personalized
advice
and offers for credit cards and loans. (Sharing tax data is not a requirement
to use
any of TurboTax's free services.) Credit Karma is more upfront than many other
data
companies about how it makes money from our information. Its website has a page
illustrating its business model, though it doesn't tie it to the free tax prep.
There's more than just an individual privacy concern at stake. "This is the
pay-for-privacy model," says Adam Schwartz of the Electronic Frontier
Foundation, a
digital rights group in San Francisco. "I'm very concerned about us moving into
a
society of haves and have-nots. Free can have all sorts of hidden costs.
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