It’s Getting To Know You Tuesday! Our guest today is blogger William Perez, who serves as a guide at About.com: Tax Planning: US.
1. Where are you now?
I live and work in San Francisco, California. But physical location is becoming increasingly irrelevant in my profession. Most of the work I do is performed using the Web, email, fax, and overnight shipping. And as a result, I get to work with very interesting people who live all over the world.
2. What’s your official title and what does it mean?
I’m a human being first and foremost. Plus, I am self-employed and don’t have a title. I write about tax planning for the About.com network of Web sites, and I own a boutique tax practice helping clients who are facing difficulties with the IRS. I spend the vast majority of my day researching, organizing, and communicating complex sets of information: whether writing articles for About.com, organizing tax information for clients, or resolving complex cases with the IRS. I suppose a good title would be “communicator” since I’m in the business of making sense of vast amounts of information between the IRS, clients, and the general public. But at the end of the day, I have a task to do, a task as a human being, which is mine only and which I cannot delegate to anyone else. I have to take care of myself and I have to take care of my community. I’ve chosen to do that by using my skills in managing data and information. I hope this helps make a difference in people’s lives. Because, honestly, if it doesn’t help, then I have labored for naught.
3. What books are on your night stand?
My bookshelf is right by my bed, which is great for relaxing at the end of the day and delving into something other than taxes. Right now I’m reading a very well-written philosophy book by Bernard Williams, Truth and Truthfulness. Before that, I read John Berendt’s The City of Falling Angels about the burning of the Venice opera house. I’d like to read even more, so I’m thinking of getting some audio books to listen to during my commute. Any suggestions are appreciated!
4. If you weren’t working in the tax profession, what would your dream job be?
I’ve been in the information industry for my entire career, whether as a writer, editor, or accountant. Yes, accounting is most definitely an information industry, and one that demands many of the same skills. We now have so many ways to gather, compile, and transmit information using collaborative technologies. These technologies are just now starting to come to the tax profession, and it’s very exciting. My dream job has long been to be at the center of a vast information network: compiling, researching, summarizing and re-distributing useful bits of knowledge. And that’s pretty much what I’m doing now. If my focus wasn’t on tax, I would be doing the same thing with a different subject — perhaps something in the humanities.
5. What’s the last movie that you saw (DVD or in the theatre)?
I just watched The Death of Mr. Lazarescu, a Romanian film about an elderly man who has trouble getting the medical attention he needs. The film is labeled of comedy, but it’s a comedy in the classical sense of the word. Before that, I saw Finding Nemo again.
6. Tax is a huge subject. What’s your area of special interest?
I have a very special interest in helping taxpayers who need to file late tax returns. So often, individuals and small businesses fall behind in filing, and then they feel overwhelmed and ashamed and have no idea what to do. It’s very rewarding to guide them through this process, get them caught up with the IRS, and back into the habit of filing on-time. So many times, these taxpayers are demonized by the IRS, by the press, and even by other accountants as “non-filers” and “delinquents.” But the reality is, people miss deadlines and fall behind. They aren’t cheating or trying to escape the system. In most cases, something very traumatic happened in their lives, such as a failed business or a divorce, and they are just beginning to pick up the pieces of their lives and get back on track. Of course, this also presents tactical problems, as tax laws change every year, and remembering all the special rules for each tax year takes a special kind of diligence.
7. What’s the best tax or financial advice that anyone ever gave you?
I forget where I heard it from, but the best advice I ever heard was “pay yourself last.” That’s the exact reverse of the usual advice. More and more people are going into business for themselves, becoming independent contractors, or switching jobs. That can be a recipe for financial disaster because we forget to save for retirement, pay our taxes, or save for big expenses. Discretionary spending should be our last priority. And I really believe that saving for retirement ought to be our top priority. Not only will this reduce our taxes, but it will provide us with financial security in case we encounter an economic downturn.
8. Coffee or tea?
Coffee! I really love coffee, and probably drink too much of it. The best cup of coffee I ever had was at a tiny cafe in Rome, in an alley behind the Pantheon. (I forget the name, but it’s about a block away from the often-recommended Taza d’Oro.)
9. Name five artists on your mp3 player.
Okay, here goes. Client, Juno Reactor, Morcheeba, The Corrs, and Kitty Margolis. These are amazing artists creating beautiful music that really makes you stop and think. I have very eclectic musical tastes, and am always on the look for new artists to listen to.
10. What would I be surprised to know about you?
Lately I’ve become obsessed with science news. We are discovering some rather amazing things about the world around us. We are now able to modify our genes, engineer our food, change our gender, and view satellite images right from our computers. There’s a new pharmaceutical that allows people to stay awake and mentally alert for two full days, apparently with few side effects. Soon, we’ll be able to modify each and every aspect of our life using various technologies. All this technology is forcing us to re-examine who we are as a species, how we want to look, how long we want to live, and, most importantly, how we want to live. But at the end of the day, we are still subject to the laws of mortality. We will each of us die. So what can we do to make life a little better, for ourselves and others? This is certainly a far cry from preparing tax returns and writing about the latest tax credits. But what is a tax credit really, except the nation trying to help people through tax incentives. Perhaps we’ll eventually have the technology to engineer our tax life as efficiently as we engineer our biological life. I would like to figure out if that’s even possible.
11. What college did you attend (in what subject)?
I have a master’s degree in philosophy from San Francisco State University. I attended several schools as an undergraduate, including the University of Dallas. I’ve tried applying to doctoral programs, but that’s intensely competitive. I’m going to hold off on that until I have a clearer idea of what I’d like to research. (Perhaps there’s something deeply philosophical about taxes? I don’t know.)
12. If you had the opportunity to make one change in the tax code tomorrow - an extra credit, a disallowed deduction, whatever - what would it be?
I am very adverse to making changes here and there in the code. We really need a flexible and transparent set of tax laws: one that collects taxes fairly, broadly, and efficiently. We should have a document that taxpayers can actually read for themselves, and be able to figure out their tax liability without pulling out their hair. However, I’m not sure we can expect fundamental tax reform anytime soon, but I’m hopeful something can be accomplished in my lifetime. Until we have a national dialogue on tax reform, we will still need to make changes in the code to address our most pressing social problems.
One of the biggest economic threats we face as a nation is saving for retirement. Some of us don’t max out our 401(k) plans. Others don’t have access to 401(k) plans at all. And some people don’t even fund their IRA, even though everyone can. I was talking to one reader earlier this year who was trying to figure out why her IRA contributions weren’t deductible. It turns out, she was covered by her 401k plan, but only for one month until she got down-sized in February. She couldn’t max out her 401k because she no longer had access, she couldn’t get a deduction on her IRA, and she made too much money for a Roth. Do we really want to penalize taxpayers for getting laid off? Taxpayers are going to start retiring, often with little or no savings. We are heading into a very critical period, one that will strain our economic resources unless we give people the tools to take charge of their retirement.
Some of my clients have started taking my advice to max out their 401k and their IRA. What a powerful combination! That provides $19,500 in tax-deferred savings (or more if you qualify for the catch-up contributions). But, not every one has access to a 401k plan. So here’s two tiny changes in the code. Allow an annual limit of $19,500 under Code Section 402(g)(1). Next, create parity between IRAs and 401k-type plans by making the IRA contribution limits in Code Section 219(b)(5) refer the same limits under 402(g)(1). This would provide all Americans with the same opportunity to save for retirement, whether through a 401k, traditional IRA, or Roth IRA, or a mix-and-match of all three. Of course, these annual amounts should be indexed for inflation and there should continue to be catch-up contributions for those age 50 and older.
Please send me hate mail if this idea stinks. Seriously. I’m not a policy wonk. But I do think the tax code needs to work harder to make it easier for Americans to take full control over their financial destiny.
13. What’s the best thing on TV right now?
I was very depressed when the final episode of Prime Suspect aired on PBS. I don’t own a TV, so I rely DVD rentals and the Internet for my programming.
14. What do you think Congress will repeal first: estate tax or AMT?
Neither. Both programs bring in too much revenue for Congress to repeal altogether without raising raises across a broad spectrum of taxpayers. The estate tax receives a lot of media attention, but taxpayers can completely avoid estate taxes, if they so desire, through proper planning. The alternative minimum tax is more troublesome. Every year more and more taxpayers are getting trapped by the AMT, and there’s very little that taxpayers can do to avoid this tax. Most of the AMT adjustments are for state, local, and real estate taxes. So it would make sense to built limitations for those deductions into the code instead of continuing to have a parallel tax system. But if we really think about it, do we really want to provide disincentives for paying state, local, and property taxes?
15. If Uncle Sam handed you a huge refund check right now, what would you do with it?
If I’m getting a huge refund, there must be a mistake somewhere. I plan my taxes so that I owe a little every April. This helps keep me on my toes, and reminds me that taxes are something I have to pay whether I like it or not. In the excitement over refund checks, many taxpayers ignore their total tax liability, which is the amount they were obligated to pay into the system based on their tax situation.
But if I did get a windfall, I would use it to max out my IRA, and then use any left money over to upgrade my health insurance.
16. Biggest tax newsmaker: KPMG, Jenkens Gilchrist or Richard Hatch?
Why do the bad guys get to be the newsmakers? Taxes are scary enough, and hearing about how large accounting firms are helping people defraud the system is just sickening. It’s no wonder that honest taxpayers start to wonder if they can get away with it too. I’d like to nominate a completely different tax newsmaker: Warren Buffett. His annual letters to shareholders are full of interesting tax stories. In his 2006 letter, he stated “Had there been only 600 taxpayers like Berkshire, no one else in America would have needed to pay any federal income or payroll taxes.” [page 19, http://www.berkshirehathaway.com/letters/2006ltr.pdf]
Think about that for a minute. Go ahead, I can wait.
The IRS received and processed 17,470,645 tax returns in fiscal year 2006. [Table 2 in the Internal Revenue Service Data Book 2006, Publication 55B, Washington, DC, issued March 2007] But all that would have been needed are 600 tax returns from healthy, profitable companies. That’s an outstanding observation that Buffet makes. However, I do think taxes need to be collected from a very broad base, so that we all can have a say in how the government spends our hard-earned dollars. But one does start to wonder if something can be done to vastly simplify our tax life.
17. And, other than taxgirl, what’s your favorite tax related web site?
I’m a huge fan of Kay Bell’s Don’t Mess with Taxes. It’s my favorite tax blog right now. Of course, I think my own site at taxes.about.com is pretty good, but I am very cognizant that there’s a lot of room for improvement. Tax is such a complex and important topic, and there’s plenty of opportunity for people to collaborate on making sure taxpayers are informed about all the great strategies for keeping our taxes as low as possible. Tax professionals who are interested in writing articles and getting published should contact me, as I am always on the look for great content.
Thanks William!
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