Read a good tax book lately? You may score points with the IRS
Mr. and Mrs. Cheerful Taxpayer made out like bandits in the stock market last year. One of their stocks, Huge Profits Inc., zoomed from $20 a share, when they bought it late in 1984, to $80, increasing the value of their investment from $1,000 to $4,000. Being generous people, the Taxpayers decided to share their good fortune with their favorite charity by selling the stock and donating the proceeds.
Oops! If they had checked one of the many tax books now crowding the shelves of bookstores and newsstands, Mr. and Mrs. Taxpayer could have saved themselves some money. By selling the stock first, they might have to pay as much as $600 in taxes, depending on their bracket. If they had simply given the stock to the charity, the $3,000 capital gain would not have been taxed.
That's a ``dramatization'' of an example from ``The Arthur Young Tax Guide 1986'' (Ballantine Books, $8.95). This is only the second year for this one, but for complete information and clear explanation, it's probably the best of them.
Unlike publishers of other tax books, Arthur Young & Co., the Big Eight accounting firm, did not start from scratch. The heart of the guide is ``Your Federal Income Tax,'' or Publication 17, available for no charge from the Internal Revenue Service and reprinted in full in this book.
So why spend $8.95 (deductible, as are all tax preparation books) for something the IRS gives out for nothing? Even though all of Publication 17 is included, it's what Arthur Young has added that makes the expense worthwhile.
Whenever the editors feel more explanation is needed, which is very often, they have added text of their own to discuss IRS positions, give examples of how the tax laws might work in specific situations, and tax planning tips. There are also discussions of areas where an IRS position may differ with rulings or opinions of courts and tax professionals.
After all, even the inside cover of Publication 17 concedes that until ``differing interpretations are resolved by a higher court or in some other way, this publication will continue to present the position of the Service.''
To help readers find the information that takes the taxpayers' side, Arthur Young puts it on a blue background so it stands out from the IRS material. The book also contains a good table of contents and a comprehensive index, tax tables, a glossary, and copies of the major tax forms, which you can use to file your taxes, if need be.
Actually, Publication 17 isn't too bad as a tax book, as long as you remember that it's biased. Even though Publication 17 comes from the federal bureaucracy, the writing is fairly understandable for a layman; all of the most common tax questions are covered; and best of all, it's free. You can get it from your local IRS office or by writing the form distribution office listed in the tax form instruction packet. Of course, if you buy the Arthur Young guide, you won't need it.
For some people, the Arthur Young book may have too much detail. If all you need is something to ``walk'' you through the lines on the tax forms and answer the most common questions, the ``H&R Block Income Tax Workbook'' (Collier Books, $6.95) will do quite just fine. It's clearly written and has a nicely arranged table of contents and a good index.
One interesting feature is a group of pages where the 1040 forms are reproduced. Here, the authors have added explanations of each line, what information is expected, and, on many of the items, where to find more information inside the book.
And while everyone is wondering how the House-passed tax reform bill might affect their taxes, there is a good section that discusses recently passed tax laws and how they are or will affect taxes. Some of those laws took effect last year, so they will have to be considered when you file your 1985 return. For instance, people who claim a charitable deduction of more than $5,000 ($10,000 for stock) for the contribution of a single item of property, or the aggregate of similar items, have to get an independent appraisal of the property and attach a summary of that appraisal to their tax returns. The appraisal rules do not aply to publicly traded stock.
The Block entry also includes tax tables, a glossary, and copies of the most common forms. In addition, it comes with a guarantee coupon: If you throw up your hands and have to go to an H&R Block office after all, you can deduct the book's $6.95 price from the preparation fee.
A different but no less readable approach can be found in ``Pay Less Tax Legally,'' by Barry R. Steiner (New American Library, $5.95). Mr. Steiner, a CPA and former IRS agent, has made this one of the most readable of all the tax books. It is distinguished by special pages where the tax law for certain items is spelled out on one side of the page and ways to save taxes on those items are discussed on the other side.
Checklists and sample tax forms are distributed throughout the text to make it easy to see how to use one of Steiner's tax tips on your forms. Last year, Consumer Reports gave this book its top rating for ease of understanding and completeness of information, based on a survey by legal experts and business students. But the magazine did not include the Arthur Young guide. With that exception, then, we would tend to agree with Consumer Reports.
For those who like lots of detail, you can't get much more of it than ``J. K. Lasser's Your Income Tax'' (Simon & Schuster, $7.95).
Just a glance at the pages of this one tells you it's for the serious tax-filer, the person who likes to think he's getting some ``inside stuff'' from an official-looking publication. It's printed on rough paper, in fine type, with section and subsection numbers heading each new item. Most important, it's crammed with detail about tax laws, filing tips, and recent tax court rulings.
When it comes to indexes, this one is the champ, with seven of them. Four of the indexes are actually checklists of such things as what to include in gross income and allowable deductions. Each item on the lists has a reference number to lead you inside the book.
Then there is the standard index in back and abbreviated indexes on the inside front cover and on the back cover. These indexes alone make the Lasser book one of the best for looking things up; it may not be much fun to read, but it's a great reference.