Easing the Burden of Tax Season with Column Tax’s Gavin Nachbar

Episode Overview

Our Guest: Gavin Nachbar – on Simplifying Taxes for Low-Income Tax Filers

Gavin Nachbar is the co-founder and CEO of Column Tax, a company dedicated to revolutionizing tax filing for low-income tax filers. His journey into the fintech world began with his extensive experience in strategy and operations at prominent technology firms. Gavin holds a BA in mathematical economics with a minor in political theory from Colorado College. His career includes significant roles at companies like Waymo, where he led operations strategy and infrastructure, and Premise Data, where he was the head of sales and business operations. His background at Dropbox as the North American lead for sales strategy and operations further honed his skills in leveraging technology to solve complex problems.

At Column Tax, Gavin is passionate about simplifying the tax filing process, particularly for low-income tax filers. The company’s mission is to democratize access to tax and financial advice, making it more accessible and user-friendly. Gavin and his co-founder drew inspiration from their own frustrating experiences with tax filing, leading them to create a solution that integrates tax filing capabilities directly into banking apps. This innovative approach not only saves time but also reduces the financial burden associated with tax preparation, providing a significant benefit to underserved communities.

Gavin’s commitment to improving financial health for Americans is evident in his strategic partnerships and product development at Column Tax. By embedding tax solutions into financial platforms, Column Tax aims to make tax filing seamless and intuitive. Gavin’s vision is to leverage open and accessible financial data to create a year-round tax management system that eliminates the stress and complexity traditionally associated with tax season. His leadership and innovative approach continue to drive Column Tax towards making a substantial impact on the way people handle their taxes​​​​​.

Episode Transcript

Kevin Rosenquist: Filing taxes, handling sales tax for businesses, and understanding how it works is excessively complicated. Do you agree or are most of us just whiny? Hey, welcome to Pay Pod, where we bring you conversations with the trailblazers shaping the future of payments in fintech. My name is Kevin Rosenquist. Thanks for listening. Taxes, that word alone can send shivers down people’s spines. They’re confusing. They’re laborious. It’s hard to figure out what you can deduct and what you can’t. Column Tax is looking to change all that. Gavin Nachbar, along with his business partner, built Column Tax as an API-first product that integrates with banking apps to allow people to track their financial data and file for them come tax time. They feel strongly that Americans spend far too much time and money filing their taxes, and they believe that there’s a better way. If you’re interested in learning why taxes are so complicated and how we can leverage technology to reduce the burden that most people feel come tax season. You’ll want to check this one out. Joining me from New York City, Gavin Nachbar. Tell me how many times you’ve heard this statement, “I [insert preferred curse word] hate dealing with taxes.”

Gavin Nachbar: Daily, weekly, monthly, a lot.

Kevin Rosenquist: I feel like filing taxes, handling sales tax for businesses, and understanding how it works is excessively complicated. Do you agree or are most of us just whiny?

Gavin Nachbar: Both can be true.

Kevin Rosenquist: They’re not mutually exclusive.

Gavin Nachbar: So what I think is it’s so context-specific, but in the US, the income tax code, which is what I know best at this point, what I spend most of my time on is very complicated and on a relative basis compared to other countries or other contexts is way more complicated. The impact. So yes, I think it is probably too much and at a disservice to the individual. So if things get too complicated Somebody can’t understand them, it’s probably too complicated overall. So I think people have a right when it why.

Kevin Rosenquist: Good, I like feeling justified. Why are they so much more complicated in this country? Is there any particular reason or just kind of morphed that way over time?

Gavin Nachbar: Yes, my opinion would be you could get different opinions on this. So my view on it would be that the US tax code is the way that we govern, basically economic interests between the government and private industry in the US. It’s the it’s the set of rules that governs how we pay for things federally at the state level. The US tax code is the corporate tax and income tax for individuals on the income tax side, the way the US tax code is made is that Congress passes legislation and then the IRS implements that legislation, which ends up being very political by definition. So Congress is the one that’s setting the law. I think on top of that layer, on one more level of complexity, over the last 10 or 20 years, the tax code has largely been one of the ways that the federal government has administered financial health, benefits. So I think earned income tax credit. So for low-income Americans, that program is one of the single largest, safety net type of programs we have that’s done through the tax code. So in combination, you have, lots of political interests. Plus administering financial benefits creates complexity. plus on these edge cases, we are pretty deep in understanding these at this point. Many of them are logical. Some are some are a little bit much. But like many of them are logical. Then you just end up with a lot of rules. So there are just tons of rules.

Kevin Rosenquist: That makes sense. It’s not that complicated when you get to the root, but there are just so many rules that it feels complicated.

Gavin Nachbar: That’s right. If you have a system where you’re continually adding this edge case and this edge case and you’re protecting for those, which is oftentimes what ends up happening, you get a very complicated tax code overall. So for software companies that deal with the tax code and help individuals manage that tax burden and the tax situation, you’re, well, you’re kind of beholden to the structure of the tax code. You can’t there’s no innovation in the tax code. We are simply responsible for bringing that to the individual as opposed to no one wanting their tax software company cutting corners.

Kevin Rosenquist: No, no, that would be bad.

Gavin Nachbar: That’s right. So your job is to represent that and help people around what is already a well-defined set of rules.

Kevin Rosenquist: You seem to be, charging right into the tax space like a warrior in battle. You’re not afraid of it like the rest of us are. What made what made you want to create Column Tax?

Gavin Nachbar: I think the same thing that you mentioned that scares people off of it is what attracts us, which is the complexity. So for me, when I think about the software industry, what’s happening, and this is the first company I’ve built in fintech, as I get to know people in fintech, I find that they’re very fearless in general, less afraid of older systems. The way things are done is broken then some some other industries. So I’ve just been energized by that. The impact of it. The more complex the problem, the higher the potential you have for impact. also just think it’s specifically a way to help low-income Americans, as I call him. That’s a big focus of ours. There are disproportionately more options for low-income Americans to file. So that origin story, my co-founder and I worked at Waymo, and I spent four years working on self-driving cars, very different types of taxes, a little bit different. we started calling them we left and wanted to found a company together. We both had experienced negative experiences with taxes before. So drawing on our own personal experience, looking at some of the things that were energized by, we just think the world’s going to change quite a bit in the next ten years. That will enable a company to build way better taxpayer experience around the whole year as it relates to taxes. So, in short, we were just kind of inspired by the impact of the problem or the impact that this could have and where the world is going. it just felt like this company should exist, like it should be there.

Kevin Rosenquist: That’s great. That’s a great origin story. Finding a problem and feeling like, this is this is a problem that needs solving. Let’s do it. That’s what everybody wants to do to help people.

Gavin Nachbar: We felt crazy for the first couple of years in a good way. We’re like how and he and I are both very much historians. So when we started, we like to think of ourselves as historians. When we started, we wanted to talk to everyone who had built in this space for the last 10, or 20 years and learn, what well, what didn’t, what’s hard. Billing tax is hard. It’s a difficult problem. We think we have a different approach that will work. we like that. We think the less-trodden path is a good one. So that energizes us.

Kevin Rosenquist: Your website states we are on a mission to democratize access to tax and financial advice for all kinds of goes in with what you’re talking about earlier about it not being fair. Can you elaborate on that?

Gavin Nachbar: Yes. So let me talk about where our mission is, where we think the world is going, and then how software plays a role in that. We, want to help all Americans get access to more fair, and open tax products. What that means in practice, let’s talk about what it means to do your taxes in the US there’s a set of rules. As we talked about, Congress has passed legislation. The IRS has those rules. you are required once a year, within certain bounds, to report to the IRS on your income so they can make you pay taxes on it. They collect money. That money funds the government. So when you report your income, you also have a chance to report a number of other things about your life, whether it’s deductions that you took, credits that you’re eligible for, information about dependence, or people that married and a partner that you have. So it ends up being a fairly large exercise once a year to get all that information out of your head and from all these different information sources to the IRS, that’s the world today. For Americans, that means something like 5,000,000,000 hours in $35 billion spent on this every year. It’s a very large and cumbersome activity.

Gavin Nachbar: We think that disproportionately impacts low-income filers. Because the tax refund is the single largest check many people in this country see, in a given year, their taxes take on a whole extra meaning. It’s not just the activity I told you about income reporting credits, it’s also getting access to a important check. So in practice, what this means is people want to file. It’s a very high-stress activity, and there aren’t that many companies today that are looking towards the future, in my opinion, about where is the world going and building software platforms around that. So where we believe the world is going, more data is going to become open, accessible, and permissible. So whether that’s payroll data or investment data, we think there’s an opportunity to bring together a platform that is purpose-built in, with the thought that data will be much easier to collect and aggregate into one place so that you don’t have to do that whole, like, where’s my 1099? Like, where is that thing? It magically lives within a single place that is your home for taxes. Effectively your taxes are done because data collection is the single hardest part of the tax filing process. Once you have that part around the rules and code.

Kevin Rosenquist: Yes, I see that makes sense. Trying to get all your everything together. How do you put that into practice?

Gavin Nachbar: Today we partner with fintech, neobank, and banking companies to offer tax products directly to their end users. So tax filing and year-round products. So let’s take a specific example. They just shared publicly about an awesome job that they did this year on tax filing. We work with a company called Found. So found is small business uh or sole banking for sole proprietors. They offer a banking product and, and a whole suite of financial products specifically for self-employed independent contractor small businesses. They do a nice. Job for their users year-round, helping them manage their deductions. Have you ever worked as a self-employed individual?

Kevin Rosenquist: Yes, I am right now.

Gavin Nachbar: There you go. The receipt tracking, the deduction tracking. Pretty cumbersome. Yes. Found a nice job year-round, mate. Simplifying that process. At the end of the year, they have this whole packet of information that’s ready to go. So Colin has built APIs so found can work with us directly to import that information into the tax software. Whereas before someone would have had to go download a PDF, go type in all the inputs. By the way, pay $200 to go file with the self-employed tier of a DIY tax product. So offering this included with found plus their subscription tier saves people a lot of time, and a lot of money and just fits better. It’s more natural. So that’s an example of putting that into practice.

Kevin Rosenquist: And how does what you guys are doing benefit low-income people? And maybe some people who are underserved?

Gavin Nachbar: Let’s continue with the found example. If you drive for Uber, let’s say make 20 or $30,000 of what would be considered revenue at that point since you’re a small business but income for an individual, you have two problems. I would say, the first is did you manage all your deductions because you can deduct if you drive for Uber, you can write off all the gas, all of the depreciation on your car, and a whole set of things. There’s a big education component to that. You have to know it. You have to have that in place. You have to understand that this is encouraged in the tax code to manage these types of things. So the first is managing that in the financial awareness. The second is filing. Low-income filers spend a disproportionate amount of their income just to file their taxes. So $200 for a DIY self-employed product, 500 or $1000 to file with a preparer columnist structurally lower prices connect it to apps that you already use and it’s way more time effective. So saving people time and money.

Kevin Rosenquist: Yes, I’m one of those people who have a tax person because I don’t want to learn it. You know, I don’t want to try to figure out all those little things that you were talking about because of the little deductions my wife’s a realtor, too. So we’re both self-employed and, so it’s just, I don’t know, I’d rather just go like this and just pass it off.

Gavin Nachbar: Totally and that’s a very natural thought, right? You’re you’re not a tax person. No. You’re running your business. you shouldn’t have to be you should be able to get every advantage of the tax code without having to be a tax expert. I believe the tax profession is amazing. I’m so we spend a lot of time with tax professionals and people in the space. They’re amazing. They have the tax code encoded in their head. Right. Like they understand when you ask them, hey, can I do X? They have a rule set that they’re running in their head and, and have case law against it. It’s amazing.

Kevin Rosenquist: Yes. The person, she’s incredible I don’t know how she knows what she knows. It’s an encyclopedia.

Gavin Nachbar: I am so impressed. I’m continually impressed by meeting tax people and how much knowledge they retain. Our goal is to, like, help encode more of that into software that is specifically API extensible and connected to data. So tax professionals can focus more on insights or advice as opposed to data aggregation, which is what everyone wants. Like no one wants to spend time collecting and aggregating data, right? People just want to focus on the impact. What does it mean? I don’t have to think about it. So that’s our goal. Software at its best is great with rules encoded seamlessly in the background. That’s what this should look like.

Kevin Rosenquist: Yes, I suppose that’s why my tax person has a bunch of underlings to handle all the data stuff so she doesn’t have to worry about that.

Gavin Nachbar: It’s a ton of work, a ton of work.

Kevin Rosenquist: I’ve done my own taxes before in the past. Not when I had my own business, but before. I was just like, Good God, I don’t know. I don’t want it’s just it’s a lot. Even when you use TurboTax or something, it’s still can be cumbersome, totally.

Gavin Nachbar: And you have to you have to have a good set of understanding. Our hope is that software can help with this over time by connecting in and then also just being more, Yes, like more proactive during the year, year-round products can help people get ahead of this because, by the time you’re filing, everything’s done. Like all the deductions you could have claimed, the time the window has passed. Yes.

Kevin Rosenquist: You’re gone. You’re done.

Gavin Nachbar: So connected embedded is the way to do that.

Kevin Rosenquist: Yes. I think it’s interesting that your product is API first. So what do you integrate with? Do you integrate with accounting software and HR software or both?

Gavin Nachbar: So this year we worked with over 30 partners. Each of those partners integrates the column API into their app. Then they offer tax products directly to their account holders or end users.

Kevin Rosenquist: Okay. Gotcha.

Gavin Nachbar: Then on the back end, we do everything we can to make the experience of filing better by bringing that data in. itself and connecting with that partner app. That’s exactly right.

Kevin Rosenquist: Yes. That’s good. That’s cool though. That makes it a lot easier for people to implement because you don’t not any easier for, I suppose I would think for as an easier sell for you guys because you’re not asking people to switch an entire platform, you’re just asking them to put this piece in there that their customers will be thrilled to use. Exactly. You can file directly from it and everything.

Gavin Nachbar: Exactly. For our partners, think about a mobile banking company like a Varo or Currents type of platform. They’re doing more and more for their users, around financial services. They, want to bring in more products that help their users save time and money, and reinforce the value of the products they already have, and taxes are a nice fit within those, both for banking, self-employment, for investment-focused companies. So that’s where we spend a lot of our time.

Kevin Rosenquist: One of the new things in the tax world is the IRS Free File program. it helps taxpayers prepare and file their taxes for free. I’ve read mixed reviews. Some argue it doesn’t solve the challenges faced by many Americans. What is your opinion on that product?

Gavin Nachbar: So the IRS has two programs, the Free File Alliance, that has been around for, I don’t want to say the wrong number, a good bit of time. As members come in and out, I saw a nice uptick in, the number of people taking advantage of Free File Alliance filing this year. Then this year, they piloted a direct file program. the first time that the IRS has done that directly. I think for us, the way we think about it is Americans spend too much time and money on taxes today. That’s the mission of the Column. We think there’s so much the IRS can do within its power to help simplify that. a filing system itself we’ll see what that looks like in practice at scale. This is more limited, but I think our North Star is Americans are spending too much time managing and filing their taxes, and we are pro anything the IRS can do to reduce that burden. We think there’s a ton they can do within the IRS with public-private partnerships. So we’re generally very pro a friendly or tax system and friendly or tax software.

Kevin Rosenquist: Whatever that looks like, whatever that looks like. Yes. Pro did you see the the product at all? I didn’t I didn’t see it. Is it how was it easier to file than the steel TurboTax etc.?

Gavin Nachbar: I did spend a good bit of time with it. So first, I think it’s super impressive that the IRS stood something up, in the time frame that they did. Yes, that’s true government software in general. It takes a lot of time to develop software. So and.

Kevin Rosenquist: It’s always behind, right? You go on to like your secretary if you go try to renew your driver’s license and you’re like, what is this from, is this from like 1995? Like, what is this?

Gavin Nachbar: So I think we should be celebrating like as a country and as a tech industry, we should be celebrating when government institutions, federal or state are able to ship software into the world and test it. I think that’s wonderful. So pilot this year I did spend time with it. I think her tech’s the hardest part is the actual questionnaire and experience. Right. Like how does data get brought into the experience and then how does it connect with federal and state filing? 41 states in the US require an E filing plus DC. That’s 42 jurisdictions. They pilot it and just states that didn’t have state income tax plus a couple, I think New York and Arizona. So it was more limited in scope, I think in order to do it right, what I would say I’d written something about this last year, the thing that matters to taxpayers, there are three things we hear over and over. Do I trust this? how is the experience of entering data, and then how does it connect between federal and state? And so I think we should solve those problems for people. I’m huge, hugely proud. I think the IRS piloting it is a good step for learning. They’ll learn a lot of the same things we have around just how hard this is for taxpayers and how much is about the tax code itself.

Kevin Rosenquist: Oh, that’s interesting. So you think maybe we might see changes because of their experience firsthand with this product?

Gavin Nachbar: I tend to be an optimist. So the the optimistic part of me thinks that, if the IRS did start taking a role as being both administrator and collector, right, they had an interface and collector, which they piloted this year, maybe that would lead to, friendlier rules and experiences, more open data and good things. I will hold my breath, but I do think that would be good for the country.

Kevin Rosenquist: Yes, I agree, I think it would too.

Gavin Nachbar: The IRS has so much good data that it should make it more accessible and permissible to individuals. They have all of your prior year returns. T\here’s a ton there. I would love to see better interfaces for people. Get that data for whatever use they want. Whatever interface that is, I think audible data from the IRS would just go such a long way. I feel the same way about the credit bureaus. like anyone who has access to lots of data, I think it should be more open and more individually permissible. I think the IRS is the same. Yes.

Kevin Rosenquist: The tax prep industry does not always have the best reputation with people. you know, there’s I’ve read stuff about deceptive practices and upselling and things like that. Is it hard to build trust in this space because of that?

Gavin Nachbar: Very hard and even further, a number of our partners offered free tax filing this year. as a result of some of the things you just mentioned in the industry, people don’t believe it. They’re like, this can’t be true. To the point, I’m not kidding. We had many people, have many people asked us to pay. They’re like, no, I want to pay because that’s my expectation. I’m like, I, I expect that I should get something for this and I expect to pay. I think that’s bad. I don’t think that is a good mindset that people should have. I think that’s the result of, tax software companies anchoring people on this kind of like upsell model, which I generally don’t think is, user-friendly. So yes, it is challenging. It’s hard to build trust. We’ve had times where people don’t reach out to support because they think they’re gonna have to pay for it. That’s not uncommon. We have lots of people concerned that if they ask for help, they’re going to get put in a new tier. We have people who might not think about adding income because they might get upsold to a premium tier. All of this is terrible behavior on what is, purely administrative duty. We have to report your taxes. It should be straightforward. So yes, I think it is negative. I think there’s a lot we can do with our partners. Let’s take a borrow or a current or chime. This company has done so much in banking to build, like, better reputations around getting your paycheck two days early, and not having ATM fees and overdraft fees. So I think in partnership with companies like that, we can do a lot to refresh how people think about friendly tax products. Or at least again, the optimist in me does.

Kevin Rosenquist: Yes. You’re optimistic. That’s good though, in your line of work.

Gavin Nachbar: For me.

Kevin Rosenquist: You mentioned Waymo. You were you were head of operations strategy and infrastructure. for those of you who don’t know, Waymo used to be just the Google self-driving cars project. You were also head of sales and biz ops for premise data. also used machine learning somewhat there. So you were kind of privy to the AI world before most of us, it would seem.

Gavin Nachbar: That’s probably fair.

Kevin Rosenquist: What did your company level do you see did you see this coming like this? This revolution?

Gavin Nachbar: No, I’m not a crystal ball guy. I’m more of a tax guy, I think no, I think in short, no. But I do think some of the applications over the last year or two years have been cool and interesting. Waymo for sure. I think a great example of applied machine learning. I premise also has a cool also more visual-spatial than some of the more text-based LM advancements over the last 1 to 2 years. I think what’s so cool about Waymo is it’s just starting to get the attention it deserves. In my opinion, that company has done such great things for ten years, and now you’re seeing the fruits of that labor. It just takes time. These things take time. Not a very patient world or industry in general. Nope. So Yes, like when when we were there, it was cool to ride in a fully driverless car, see the impact, and just know that it’s where the puck is heading. I’m not sure I had as much vision into how much other industries would be impacted by in particular LMS, generative AI, um versus more like ML and vision, which I think premise and Waymo both been a little bit more of with the.

Kevin Rosenquist: Shift from doing that to starting your own building your own, tax product. Was there anything you mentioned seeing something that the problem that could be fixed, but it was this something that’s been an interest of yours, or are you one of those strange people who, like, are interested in the tax and think that it’s entertaining and to learn about it and stuff?

Gavin Nachbar: Well, my co-founder nerds, and I are nerds. So Yes, in general, I think we’re attracted to highly complex rule-based problems. But no, I think one of the things that he and I were excited about coming out of Waymo was so Waymo’s operations strategy was people’s cars, infrastructure, and power. That was where I spent most of my time an amazing operations team there that has a complex in-world operational problem. One of the interesting sub-parts of that was around electric vehicles. I mentioned power, the power. Needed to charge and maintain an electric vehicle fleet. That was one of the things I worked on, that has a lot of government-related problems. So when we left, we were pretty interested in government private. That was one of the big areas that we were spending time on. So tax fell into that bucket. How do individuals and companies interface on government tasks? That was a big thing for us. So tax kind of laddered into that bucket. But that was the connection originally. Whether it’s working with municipal governments on permits or there’s a whole host of things that I did on the EV side, that was an inspiration.

Kevin Rosenquist: Do you guys use any AI at Column Tax?

Gavin Nachbar: We use large language models for customer support.

Kevin Rosenquist: Oh, for customer support. Okay.

Gavin Nachbar: I think that’s pretty pretty common use case. We don’t use, I on anything back-end related. I think tax is probably not the best application for that is where it is today. but again, we have lots of hope for, the progress of those types of products over time. But what do you do?

Kevin Rosenquist: Do you think would be a good use case for it in the tax world?

Gavin Nachbar: Here’s one that I am on. The team is excited about one of the big gaps between where we want the world to be and where it is today, understanding of what’s happening under tax return. So let’s say you file a nice at the end if you get a summary of what happened in a human-readable language like this, synthesize for me what just happened. Let me give a tactical example that we see a lot. When people, especially low-income individuals, have their refund decrease year over year, they want to know why, rightfully so, they were expecting X dollars. They got Y. I think those are nice use cases for large language models to help summarize a complicated set of things. Oh well. This earned income tax credit line X changed into something that someone can understand to help bridge the gap between last year you got X and this year you got Y. So that’s the one I get very excited about. That’s very cool.

Kevin Rosenquist: Yes, that’s a big complaint. Because people don’t they don’t understand. Who’s going to go back and look through everything and try to figure it out? that’s just an insane amount of work.

Gavin Nachbar: And that’s exactly right. And back to the conversation we were having about the human. This is what humans do. Humans are like they’re the best thing we’ve got to describe. Oh, you went from X to Y. They go, look, they understand the rules. They explain it in English to you. It’d be nice if software could do more of that and help bridge the gap of understanding from numbers into words that people understand. So that’s an application I get very excited about. I think there’s a lot of promise. Yes, I.

Kevin Rosenquist: Agree, I think that would be awesome. people would love that. What’s uh Yes. What’s on the horizon for you guys? Do you have anything that you’re well that you’re able to talk about that you guys are that you guys are working on?

Gavin Nachbar: Yes. We just wrapped up tax season, so we’re doing a lot of thinking about the next year. I feel, super excited about the growth here and the foundation that’s set for the company. So we’re looking ahead, working with partners that are motivated to build, better experiences around, the column API. So connecting tax to their other products, building that foundation and taking taxpayer first lens on how can you help people with these, these types of products. So doubling down with the partners who see and work on that vision, that’s our our number one focus.

Kevin Rosenquist: Well, I love that you guys are you guys are working hard to make something that people dislike. a lot more palatable and a lot easier. Gavin, thank you so much for being here. The company is Column Tax. I appreciate your time. Love chatting with you.

Gavin Nachbar: And thanks so much for having me.