The Ramsey Show - App - SPECIAL: TurboTax is NOT Your Friend

Episode Date: March 28, 2021

Doing your taxes sucks. But what makes it even worse is that “trusted” brands like TurboTax actually screw you with shady sales and marketing tactics that are designed to put more of your money in their wallet.  Join Dave and George as they comb through TurboTax’s 2020 Investor Day report to reveal the true strategies of this 800-pound gorilla and teach you a better way to do your taxes.  Use Dave Ramsey’s recommended SmartTax: https://bit.ly/394IFQV Or text FINEPRINT1 to 33-789 to get a link

Hey guys, it's Dave. As you know, I'm always looking to protect our listeners from scummy companies, bad products, and money myths designed to keep you broke. Our team is working on a brand new show from the Ramsey Network called The Fine Print. In every episode, our host George Camel uncovers a hidden truth to help you win with money. I joined in on the first episode to take on the 800-pound gorilla in the tax space. This episode is brought to you by Ramsey SmartTax. From Ramsey Network, this is The Fine Print, a show where we talk about the hidden truths that are keeping you broke. I'm George Camel, and in every episode, I do the research for you on the latest financial trends and traps to help save you time

and money. This week, we'll be talking about TurboTax, their shady business model, and what using their software could mean for your wallet. Now, I know tax filing may not be the sexiest topic or be high on your favorite hobbies list, well, unless you're a tax accountant, in which case I salute your strange love of government forms. But for most people, filing taxes is only slightly less painful than stepping on a Lego barefoot. Basically, this is how it works. Every year you make money, the government says, Hey, you owe us some of that. It's called taxes.

We go, okay, well, how much do we owe? And they say, well, you have to figure that out for yourself. And we reply, all right, so I just pay what I want? They respond, oh, no, we know exactly how much you owe, but you have to guess that number too. What if I get it wrong? Oh, just some fines, penalties, and possible jail time. What? That's crazy.

Now that SparkNotes summary may be a little over the top, but we can all agree that the government tends to make things clunky and confusing. So we turned to technology to help ease the pain. And without a doubt, the current behemoth in the space is TurboTax, which has almost 70% market share when it comes to self-filing. They're owned by a parent company called Intuit, which is now worth about $100 billion, thanks to its other successful daughter companies like QuickBooks, Mint,

and most recently, Credit Karma. But like most Silicon Valley tech giants, TurboTax isn't perfect. And a bunch of unhappy customers would be the first to tell you. But like most Silicon Valley tech giants, TurboTax isn't perfect. And a bunch of unhappy customers would be the first to tell you. One of those customers is Christopher Grant. It was my first year doing taxes, and believe me, I replay that day all the time, trying to think what I could have fixed, what I could have done better. I put my trust in the wrong place.

Quick backstory. We all know tax forms are super important when it comes to filing. It affects how much you owe and how much you get back as a refund. So when Christopher and his wife did their taxes in 2020, he says they were sent Form 1095-A, a statement you get if you had health insurance through the Affordable Care Act. According to Christopher, TurboTax never prompted him for the form and approved the return anyways. And after waiting five months for their refund check, he says the IRS told them the missing form is what caused the error, which put their refunds in purgatory. They should have been able to search and find and say, hey, this form does exist. Go ahead and fill

that other paperwork out. But that was not caught. And that's been the main issue and hanging up almost $8,000. Yikes. So TurboTax, they tweeted out in December 2020, get your taxes done right. Pay $0 to file Fed and state taxes with TurboTax. Simple tax returns only. They got a response from a guy who said, you guys screwed over my 2019 return. I couldn't provide my 1095A because there was nowhere in your app to include it, and your so-called tax experts who reviewed my filing approved it. I ended up having to amend my return by myself. I will be going to an accountant from now on. That sounds like you. Yeah, that sounds almost exactly like my experience.

That's wild. And Adina said something similar. She said, TurboTax says there's an error in my 1095A health form. It doesn't say what the error is and doesn't allow moving on. Its help system requires you to rephrase the question three times before an option to reach a person. It offered a five-hour wait time and now says help is down. So did you have a similar experience trying to reach out to them for help? I didn't even bother because both the IRS and the tax professional I spoke with said it was

pointless to contact TurboTax. And TurboTax, can do nothing to fix it. Exactly. It's sad when the IRS is more helpful than TurboTax. They get a lot of heat, but in this case, the IRS is looking like a champ. Yeah, actually, I hadn't even thought of it that way, but yeah, they have been more helpful. Well, I'm reading another tweet here. It says, file for free with TurboTax is so misleading. I uploaded a 1095A and was charged $40 for your deluxe version.

Then your associate suggested that I should not have included that in my return. Are you trying to have me audited? It's sad that you prey on low income and disabled. That one's from Tasha. So it sounds like they do charge if you do have that form as part of your return. Yeah. I mean, we paid anyway, even without uploading that form. And that was just to get that expert advice and have it reviewed by an expert too. That's insult to injury. So you paid to have it reviewed to make sure that it wasn't screwed up and they screwed it up anyways on top of charging you. Yeah, absolutely. As far as a federal return, that was supposed to be $4,300. Not only are

we missing that refund, but we didn't qualify for the stimulus checks based on the 2018 information. So that's another $3,600 that we're missing out on. So in total, using TurboTax cost about $7,900 that we were waiting on and still have not received. Wow. So it's 2021 now, and you're out $7,900. Where does that put you guys financially? That's definitely set us back. As far as our goals, if we look at it as time, that's about six months of our lives.

Wow. Which at this point, I don't even know what filing 2020 would look like since I don't have my 2019 return on file. It still shows that I haven't filed a return. It makes me look like I'm delinquent almost. Yikes. How did you feel about taxes before this, and how do you feel after? I'm absolutely appalled come tax season about the whole process.

It's so convoluted. You'd think getting married, starting two new jobs would be fantastic and nothing but a blessing, and it turned into a nightmare and a headache. Christopher's experience is just one of many stories that highlights why TurboTax might not have the customer's best interest at heart. But worst of all, TurboTax and their parent company Intuit have a new long-term game plan to get you and keep you in a cycle of debt long after you filed your taxes. To unpack their plan and what it means for your money, I talked to personal finance expert Dave Ramsey.

His nationally syndicated radio program, The Ramsey Show, has 18 million weekly listeners and is known for helping people get out of debt, deal with their money problems, and get ahead once and for all. And over the last 30 years, he's taken a whole lot of calls on taxes and has a whole lot of feelings about taxes. Dave, you've heard the Ben Franklin quote, nothing is certain except death and taxes. Which one do you look forward to more? Depends on whether we're talking about April. People seem to just have so much anxiety around taxes.

You've talked to people for 30 years now, and taxes seem to be one of those things that every year it never gets easier. For a lot of people, if they're going to self-file, they go to TurboTax. The majority of America is using this software. What are your thoughts on TurboTax and people using that to file? Well, I think I was like everyone else for a while, no big deal, right? I mean, they got a good piece of software and you can get your taxes filed and, you know, they're doing a great job. Until we dug into a little bit and we started learning how the company actually functions and then it kind of got icky. Well, let's dive into that because they released their Investor Day presentation from 2020. And this is publicly

accessible. Anyone can go check this presentation out. It's 113 pages. So it's a fun Saturday read, but there's some interesting things in there. Having trouble sleeping. Yeah. And so I want to go to slide 11 here. TurboTax found that the customer's number one problem was that they can't make ends meet. I know that's a shocker to you as you talk to people who are living paycheck to paycheck every day. But we know that. And, you know, and again, when you read that, focused on what matters most to our customers. That's a good company that says something like that. That's a good phrase.

And then they find the number one thing in their surveying their customers is they don't have enough money to cover my bills and cover my obligations. Too much month left in the money is the way we always say it, right? A lot of people in America are hand to mouth, you know. And so they discovered their tax customers are having trouble with their budget. That's what they discovered. Shocker. Yeah. Yeah. Well, their strategy on slide 21, 22 here, to help the customer make ends meet, they're going to unlock smart money decisions is what they're saying. And that includes helping consumers find the right financial products, which they go on to say includes credit cards, personal loans, car loans, insurance, home loans. Sounds like a lot of debt products to

me. So how does using debt products unlock smart money decisions and help these people make ends meet? Well, here's what happens. When you fool around in the financial world, you quickly learn that the financial people, the banks and their partners, make bazillions of dollars off of credit cards, off of debt, off of you. It's unbelievably lucrative. And so what happened was, I'm sure, these guys started out with an aspirational thing, focused on what matters most to our customers. Very nice. inspirational thing focused on what matters most to our customers very nice and then they realized well the customer's hurting if we can give them any sense of relief and oh by the way we make a bazillion dollars while we're doing it then the whole thing got toxic now all of a sudden the

motivation turned oh we're gonna make a pile of freaking money off of these people who used us for taxes and are living paycheck to paycheck. Because if we can give them a sense that everything's okay by giving them a car loan, that's going to feel like everything's okay. Oh, and by the way, we're going to make a whole lot more doing that than we did when we got you to use our tax software. So if they're trying to help these customers by pushing them to debt products, we've got to just unpack why are debt products bad for consumers? Because there's some listeners who are going, okay, what's so wrong with them offering me a credit card that has a lower interest rate? That's a good thing, Dave. Well, one is it's a misnomer that that's going to lead you to prosperity. It's a false set of logic. This idea, I'm going to borrow my way out of debt, or I'm going to get a lower interest rate, and that's going to fix my debt. In the meantime, oh, wait, this started when I was just doing my taxes.

So it's a complete hoodwink because it's actually the tax software now has become really a lead source for them to make money off of this other stuff. That's just wrong in terms of it really wasn't disclosed. If you're listening and you never thought about this, you came to them innocently to do your taxes, but they had a different plan for you. And so that's just a bait and switch. It's just fascinating to me that this little tax software tech company over here is becoming a financing company. And the way people lose their way is not in one fell swoop. They didn't sit down and go, hey, let's go help people get deeply in debt and charge them high interest rates.

They didn't sit down one morning and do that. By degrees, they started going, well, how can we help the customer? And they believe in credit cards. So let's help them. We're going to get them. Let's get them a better credit card. And then we'll get them this. And then we'll get them that.

And look how much money we can make. And let's get a lot of that. I mean, just over the years, they lost their way death by a thousand cuts. The most productive square footage at the dealership is this small office called the finance office. It makes that dealer more money than any other set of square footage anywhere, including the entire car lot full of 1,000 cars out there. So when you really understand the mathematics of a new car dealership, they're not in the new car business. They get you into a new car so they can get you into a loan

and get you into that shop because that's where they make their money. Yeah. Well, they made some interesting financial decisions last year where they bought Credit Karma for $8.1 billion. And on slide 24, they say that Credit Karma is the perfect partner because it helps members find the right financial product for them based on credit and financial profile. So what does that mean? What is their end goal here in acquiring Credit Karma? Now, let's think about this a minute, all right? Credit Karma does what? They provide you your credit bureau report, your FICO score, free. And Intuit paid $8.1 billion to offer you a free

service. Do you really believe that? I don't buy it. I'm not buying it. I smell something. This is crazy. They know something we don't. Well, what it amounts to is Credit Karma has all your data, and based on that data, they know how to write the algorithm to write the script now to get you to buy credit cards again. So this whole thing is all about,

it's couched in the idea that we're going to provide you with tax software. Also, we can learn a ton about you because we know what our conversion rate is in getting you guys into credit cards, and they pay us a bounty to do that. And as a matter of fact, their own stinking little presentation here that we're sitting here looking at, public knowledge. They get a bounty on you. Now, you know, think about that, okay? So they're trying to get a bounty. Now, what's a bounty? A bounty is something that you get paid for killing or capturing a person or an animal.

Like, I mean, I live in Tennessee, so we have a coyote problem, right? And so you can get, you know, ranchers will put a bounty on on a coyote and so people listening you're a bunch of freaking coyotes there's a crosshair that's red on top of a rifle right now right on your freaking head and the people holding the trigger are these companies that we're talking about they get a bounty on you bring Bring the coyote ears in, baby. You get the bounty for taking the animal out. I mean, this is who you are. And they're using their tax software, this free credit score. This is the bait. This is the trap. They're trying to get you to get near so they can go, boom, gotcha. Let's sell them alone. And again, this is fairly normal. It's

not that weird. It's not that weird. It's just that no one stops and does critical thinking that says, oh, look, they bought Credit Karma. We have two different companies that have the same mission. Yeah, they have a shared mission, all right. They're trying to take you out. They're going to get you deeply in debt because they make more money on that than they do free credit karma or inexpensive tax software. Yikes. Well, let's look at some of these coyotes that they have customer examples for. In slide 78 here, we've got a retail employee named Tracy.

And they want to help Tracy. So she's done her taxes year one. And by year three, they're going to help her by financing her wedding on their credit card. Yeah, that was helpful. Because we all should go in debt for a wedding. Come on, man. Let's think, America. Use your dadgum thinking skills. This is nuttier than nutty.

And, yeah, it shows year one, two, and three, how you move from the free edition of TurboTax and the state edition in year one, and they made $0 on you. And they were happy to do that. So as you're going along through the customer journey from year one to year two to year three, what we're seeing is they're starting to say, okay, put your refund on a TurboTax debit card, which is really not the end of the world. But the purpose of that is to lead you to the credit card the next year where they get the bounty.

So that's what it says on there. They say bounty on here. It's a little bit disturbing. I mean, I got to tell you, when I'm the customer of something, I don't really want to be the bounty. Don't call me that. Don't feel good. It makes my skin crawl.

I'm worried that there's something bad happening to me if I've been captured or slaughtered or something, if you're getting a bounty on me. That's wild. So on slide 68, they say their vision, here's their vision, financial freedom for all consumers. Honestly, that sounds a lot like your vision here at Ramsey Solutions. How are they different in reality? Well, I think the argument just is what is financial freedom? Is financial freedom a lower interest on your credit card debt? Some people think it is. I don't.

Having gone broke years ago, I learned my lesson with that. And I quit borrowing money. And then I had some. It was amazing. As long as I make an income and I don't give it all to some stupid bank, I've got money. Ta-da. And so a big pile of money and no debt is my idea of financial freedom. You're not vulnerable when life's roller coaster comes along and it doesn't take you out. But financial freedom is I'm going to pay a price to win. I'm going to live like no one else so that later I can live and give, be outrageously generous.

I can live and give like no one else later. But you have to pay a price, and you can't borrow your way out of debt, and you can't walk around acting like you're rich when you're not and really be truly prosperous. That's not true financial freedom. So for years, you've recommended working with a tax pro if your situation's complicated, or you self-file and you kind of go your own way. But recently, you decided to create your own tax software. What was behind that? Well, because about half of the folks that have been coming to us for tax help really didn't need to spend $200 or $300 with a tax professional because their return wasn't that complicated.

And so they need to use something like a TurboTax or a Ramsey SmartTax or something like that. That's an inexpensive way and an efficient way and an accurate way to get your taxes filed. We partnered up with the folks at TaxSlayer, and your data won't be sold or used to sell your credit cards or anything else. And we're able to serve someone that's got a real easy file. And I'll say one more time, TurboTax is efficient. I think it's accurate. I have actually no trouble with the actual tax software. It's just that you get sucked into a pit of rattlesnakes by doing it. And so at what point do you go, I really don't want my name in their database. I don't want them having all of my income information from the tax return in their database to sell me something. I'm not going to register with Credit Karma because Credit Karma has an agenda.

I mean, you can play with snakes if you want to play with them, but they bite. And as long as you keep playing with snakes, you're eventually going to get bitten. The tax software you file with may not sound like a big deal. But if we're going to be consumers who avoid the traps and understand the fine print, then that means we have to be intentional with the companies we choose to use. And even though death and taxes may be a part of life, debt doesn't have to be. If you've got a return that's a little more complicated, work with a tax pro who lives and breathes this stuff. And if your return is pretty straightforward and you're wanting to self-file without a long-term target on your wallet,

you do have choices. One of those choices is Ramsey SmartTax. It's a simple, inexpensive, reliable way to get your taxes done, bounty free. There's no hidden fees, no selling of your data, and zero secret agenda. To check it out, just text FINEPRINT1 to 33789. That's FINEPRINT, followed by the number one, all one word, to 33789. Or just tap the link in the show notes. You've been listening to The Fine Print. You can find more information about this show, including a link to Intuit's shareholder presentation, in the episode show notes. Our show is produced by Chris Wright, Eric Cheslevich, Eva Daniel, Chris Dean, and Will Rutter.

Blake Thompson is our executive producer. I'm George Camel, and remember, tax returns are a lot like mullets. It's all business up front, and it's a party that no one wants to attend in the back. And the longer they are, check out the show notes.