Just months after revealing it was testing lending directly to consumers through its Cash App, Square says it is buying the tax business of Credit Karma to bring tax preparation to Cash App customers.
The Cash App has been growing in popularity and use cases for Square, buoyed in part through its recent bitcoin trading capabilities. But Square’s $50 million deal for Credit Karma’s do-it-yourself tax filing capabilities brings a traditional financial tool to its users, and the separation of the tax business also cleared the way for the Department of Justice to approve Intuit’s $7 billion acquisition of Credit Karma.
“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,” Brian Grassadonia, lead for Cash App at Square, said in a press release.
The all-cash deal will expand Cash App’s ecosystem of financial tools — which currently includes peer-to-peer payments, Cash Card, direct deposit, as well as fractional investing in traditional stocks and bitcoin.
The number of taxpayers who self prepare and e-File their own tax returns has grown in recent years. Square’s announcement of the acquisition cited IRS statistics that show in the 2020 tax filing season, approximately one in two tax filers, or 80 million people, prepared and electronically filed their federal tax returns themselves. On average, those filers received a refund of more than $2,000.
“We are pleased to have cleared this necessary regulatory review with DOJ and appreciate their careful consideration of this transaction,” Sasan Goodarzi, CEO of Intuit, said in the release. “Consumers will continue to benefit from the Credit Karma Tax product as part of Square.”
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