Taxes 2005 For Dummies^«

by Eric Tyson; David J. Silverman; Margaret A. Munro

• ISBN13: 9780764572111
• ISBN10: 0764572113
• Format: Paperback
• Copyright: 2005-01-01
• Publisher: For Dummies

Summary

The perfect book for the first time, last minute, and first time online filer Completely revised for tax year 2004, Taxes For Dummies 2005 is the only tax guide on the market that walks readers line by line through the most common tax forms, including the dreaded Schedule D. Filled with helpful tips and strategies for getting through the process of filing income tax returns accurately and on time, this book is aimed at individuals who want to do their own taxes without hiring a preparer. Financial expert and bestselling For Dummies author Eric Tyson teams up with tax experts David Silverman and Margaret Munro to answer the most frequently asked tax questions in plain English, taking the mystery and frustration out of the filing process. They also explain the process for tax audits and provide strategies for planning ahead for the 2005 tax season. This easy-to-use guide helps readers understand all the tax law changes for the 2004 tax year. Taxes For Dummies 2005 also includes complete line-by-line analyses that are particularly useful for people using tax preparation software such as TurboTax. In addition, this new edition also includes filing advice for those with special lifestyle needs, such as military families, the self-employed, divorced individuals paying child support, and working students. Eric Tyson is a nationally recognized personal finance counselor, as well as the author of Personal Finance For Dummies (0-7645-2590-5), Investing For Dummies (0-7645-2431-3), and Mutual Funds For Dummies (0-7645-5329-1). David J. Silverman (New York, NY) has more than a quarter-century of experience as an enrolled agent who helps clients with their tax prepartions and can represent them if audited. He is the author of Battling the IRS.

Author Biography

Eric Tyson, MBA, is the author of For Dummies guides to personal finance and investing, including the million-copy bestseller Personal Finance For Dummies David J. Silverman, EA, and Margaret Atkins Munro, EA, are tax advisors who also write about tax issues

Table of Contents

Introduction	1	(1)
What's New in This Edition	1	(1)
Why Buy This Tax Book?	1	(1)
Your Tax Road Map	2	(3)
Part I: Getting Ready to File	2	(1)
Part II: Tackling the Various Forms	2	(1)
Part III: Filling Out Schedules and Other Forms	3	(1)
Part IV: Audits and Errors: Dealing with the IRS	3	(1)
Part V: Year-Round Tax Planning	3	(1)
Part VI: The Part of Tens	3	(1)
Part VII: Appendixes	3	(1)
Icons Used in This Book	4	(1)
Part I: Getting Ready to File	5	(56)
Understanding the U.S. Tax System	7	(10)
Figuring Out the U.S. Tax System	7	(4)
You can reduce your taxes	8	(1)
Beyond April 15: What you don't know can cost you	9	(2)
Understanding Your Income Tax Rates	11	(6)
Total taxes	11	(1)
Your marginal income tax rate	12	(5)
Tax Return Preparation Options and Tools	17	(10)
Preparing Your Own Return	17	(1)
Using IRS Publications	18	(1)
Perusing Tax-Preparation and Advice Guides	19	(1)
Buying Software	19	(1)
Accessing Internet Tax Resources	20	(2)
Internal Revenue Service	21	(1)
Directories	21	(1)
Research	21	(1)
Tax preparation sites	22	(1)
Hiring Help	22	(3)
Deciding whether you really need a preparer	22	(1)
Preparers	23	(1)
Enrolled agents (EAs)	23	(1)
Certified public accountants (CPAs)	24	(1)
Tax attorneys	25	(1)
Finding Tax Preparers and Advisors	25	(2)
Getting and Staying Organized	27	(12)
Keeping Good Records	28	(3)
Ensuring a complete and accurate tax return	28	(2)
Setting up a recordkeeping system	30	(1)
Tracking tax information on your computer	30	(1)
Deciding when to stash and when to trash	31	(1)
Reconstructing Missing Tax Records	31	(5)
Property received by inheritance or gift	32	(2)
Securities received by inheritance or gift	34	(1)
Improvements to a residence	35	(1)
Casualty losses	35	(1)
Business records	36	(1)
Requesting Copies of Lost Tax Returns	36	(1)
Understanding the Cohan Rule	37	(2)
No Form Fits All (Or, What Kind of Taxpayer Are You?)	39	(22)
What Rendition of 1040 Shall We Play?	39	(2)
Form 1040EZ	40	(1)
Form 1040A	40	(1)
Form 1040 (the long form)	41	(1)
Choosing a Filing Status	41	(8)
Single	41	(1)
Married filing jointly	42	(1)
Married filing separately	43	(3)
Head of household	46	(2)
Qualifying widow(er) with dependent child	48	(1)
Figuring Personal and Dependent Exemptions	49	(5)
Personal exemptions	50	(1)
Dependent exemptions	50	(4)
Securing Social Security Numbers for Dependents	54	(1)
Filing for children and other dependents	54	(1)
Filing a Return for a Deceased Taxpayer	55	(1)
Must I File?	55	(4)
When to file	56	(1)
If you don't file	57	(1)
Where to file	57	(1)
How to file	58	(1)
A Final Bit of Advice	59	(2)
Part II: Tackling the Various Forms	61	(100)
Easy Filing: 1040EZ and 1040A	63	(20)
Who Can File a 1040EZ?	63	(2)
Filling Out a 1040EZ	65	(4)
Line 1: Total wages, salaries, and tips	65	(1)
Line 2: Taxable interest income of $1,500 or less	65	(1)
Line 3: Unemployment compensation and Alaska Permanent Fund dividends	65	(1)
Line 4: Adjusted gross income	65	(1)
Line 5: Deductions and exemptions	65	(1)
Line 6: Taxable income	66	(1)
Line 7: Federal income tax withheld	66	(1)
Line 8a: Earned income credit (EIC)	67	(1)
Line 8b: Nontaxable combat pay election	67	(1)
Line 9: Total payments	67	(1)
Line 10: Tax	67	(1)
Line 11a: Refund time!	67	(1)
Line 12: Amount you owe	68	(1)
Finishing up	69	(1)
Who Can File a 1040A?	69	(12)
Completing Form 1040A	70	(1)
Line 6: Exemptions through Line 9b: Qualified dividends	70	(1)
Line 10: Capital gain distributions	70	(1)
Lines 11a and 11b: Total IRA distributions	70	(2)
Lines 12a and 12b: Total pensions and annuities	72	(1)
Line 13: Unemployment compensation and Alaska Permanent Fund dividends	72	(1)
Lines 14a and 14b: Social Security benefits	72	(1)
Line 15: Total income	73	(1)
Line 16: Educator expenses	74	(1)
Line 17: Your (and your spouse's) IRA deduction	74	(1)
Line 18: Student loan interest deduction	74	(1)
Line 19: Tuition and fees deduction	75	(1)
Line 20: Total adjustments	75	(1)
Line 21: Adjusted gross income	75	(1)
Line 22: Successful transcription of adjusted gross income to back of Form 1040A	75	(1)
Lines 23a and 23b: Standard deduction questions	75	(1)
Line 24: Standard deduction	76	(1)
Line 25: IRS subtraction quiz	76	(1)
Line 26: Total number of exemptions times $3,100	76	(1)
Line 27: Taxable income	76	(1)
Line 28: Find your tax	77	(1)
Line 29: Credit for child and dependent care expenses	77	(1)
Line 30: Credit for the elderly or the disabled	77	(1)
Line 31: Education credits	77	(1)
Line 32: Retirement contributions credit	77	(1)
Line 33: Child tax credit	77	(1)
Line 34: Adoption credit (Form 8839)	78	(1)
Line 35: Total credits	78	(1)
Line 36: Another IRS subtraction problem	78	(1)
Line 37: Advance earned income payments	79	(1)
Line 38: Total tax	79	(1)
Line 39: Total federal income tax withheld	79	(1)
Line 40: 2004 estimated tax payments and amount applied from 2003 return	79	(1)
Line 41a and 41b: Earned income credit and nontaxable combat pay election	79	(1)
Line 42: Additional child tax credit	80	(1)
Line 43: Total payments	80	(1)
Line 44: We smell refund!	80	(1)
Lines 45a and 46: What to do with your refund	80	(1)
Lines 45b-d: Direct deposit of your refund	81	(1)
Line 47: Amount you owe	81	(1)
Line 48: Estimated tax penalty	81	(1)
Final Instructions	81	(2)
Form 1040: Income Stuff	83	(34)
Lines 6a-6d: Exemptions	84	(1)
Lines 7-22: Income	84	(33)
Line 7: Wages, salaries, tips	84	(1)
What those W-2 boxes mean	85	(2)
Line 8a: Taxable interest income	87	(1)
Line 8b: Tax-exempt interest	87	(1)
Line 9a: Ordinary dividends income	88	(1)
Line 9b: Qualified dividends	89	(1)
Line 10: Taxable refunds, credits, or offsets of state and local income taxes	89	(1)
Line 11: Alimony received (by you)	90	(1)
Line 12: Business income (or loss)	91	(1)
Line 13: Capital gain (or loss)	91	(1)
Line 14: Other gains (or losses)	91	(1)
Lines 15a and 15b: Total IRA distributions	92	(2)
Distributions before 59 1/2	94	(2)
Transfers pursuant to divorce	96	(1)
Inherited IRAs	96	(1)
Surviving spouse	96	(2)
Beneficiary other than a surviving spouse	98	(1)
Withdrawal of nondeductible contributions	99	(1)
Loss on an IRA	99	(1)
Lines 16a and 16b: Total pensions and annuities	99	(7)
Line 17: Rental real estate, royalties, partnerships, S Corporations, trusts	106	(1)
Line 18: Farm income (or loss)	106	(1)
Line 19: Unemployment compensation	106	(1)
Lines 20a and 20b: Social Security benefits	107	(4)
Line 21: Other income	111	(4)
Line 22: Your total income	115	(2)
Form 1040, Part II: Adjustments to Income Stuff	117	(22)
Adjusted Gross Income (AGI)	117	(22)
Line 23: Educator expenses	118	(1)
Line 24: Certain business expenses of reservists, performing artists, and fee-basis government officials	119	(1)
Line 25: You and your spouse's IRA deduction	119	(6)
Your spouse's IRA deduction	125	(1)
Line 26: Student loan interest deduction	125	(2)
Line 27: Tuition and fees deduction	127	(1)
Line 28: Health Savings Account Deduction (Form 8889)	128	(1)
Line 29: Moving expenses (Form 3903)	129	(1)
Line 30: One-half of self-employment tax	129	(1)
Line 31: Self-employed health insurance deduction	129	(1)
Line 32: Self-employed SEP, SIMPLE, and qualified plans	130	(3)
Line 33: Penalty for early withdrawal of savings	133	(1)
Lines 34a and b: Alimony paid	133	(2)
Line 35: Total adjustments	135	(1)
Hey! They ran out of room---the dotted line to the left of Line 35	135	(1)
Archer MSA (Medical Savings Account) deduction	136	(1)
Deduction for clean-fuel vehicles	136	(1)
Jury pay returned to your employer	137	(1)
Line 36: Adjusted gross income	137	(2)
The Rest of the 1040	139	(22)
Tax and Credits	139	(9)
Line 37: Adjusted gross income	139	(1)
Line 38a	139	(1)
Line 38b	140	(1)
Line 39: Itemized deductions (from Schedule A) or your standard deduction	140	(1)
Line 40: Subtract line 39 from line 37	141	(1)
Line 41: Exemptions	141	(1)
Line 42: Taxable income	142	(1)
Line 43: Tax	142	(2)
Capital gains and qualified dividends tax worksheet	144	(2)
Line 44: Alternative Minimum Tax (Form 6251)	146	(2)
Line 45: Add lines 43 and 44	148	(1)
Credits: Lines 46 to 54	148	(6)
Line 46: Foreign tax credit (Form 1116)	148	(1)
Line 47: Credit for child and dependent-care expenses (Form 2441)	149	(1)
Line 48: Credit for the elderly or the disabled (Schedule R)	149	(1)
Line 49: Education credits (Form 8863)	149	(2)
Line 50: Retirement savings contributions credit	151	(1)
Line 51: Child tax credit	151	(1)
Line 52: Adoption credit (Form 8839)	151	(1)
Line 53: Credits from box(a) Form 8396 and box(b) Form 8859	152	(1)
Line 54: Other credits	152	(1)
Line 55: Total credits	153	(1)
Line 56: Subtract line 55 from line 45	154	(1)
Other Taxes	154	(1)
Line 57: Self-employment tax (Schedule SE)	154	(1)
Line 58: Social Security and Medicare tax on unreported tip income (Form 4137)	154	(1)
Line 59: Tax on IRAs, other retirement plans, and other tax-favored accounts (Form 5329)	154	(1)
Line 60: Advance earned income credits	155	(1)
Line 61: Household employment taxes (Schedule H)	155	(1)
Line 62: IRS pop quiz	155	(1)
Payments	155	(3)
Line 63: Federal income tax withheld	156	(1)
Line 64: Estimated tax payments	156	(1)
Line 65a and 65b: Earned income credit (EIC) and nontaxable combat pay election	156	(1)
Line 66: Excess Social Security and RRTA tax withheld	157	(1)
Line 67: Additional child tax credit (Form 8812)	157	(1)
Line 68: Amount paid with extension request (Form 4868)	157	(1)
Line 69: Other payments	157	(1)
Line 70: Total payments	158	(1)
Refund or Amount You Owe	158	(2)
Line 71: The amount that you overpaid	158	(1)
Line 72a: Amount that you want refunded to you	159	(1)
Line 73: Amount of line 71 you want applied to your 2005 estimated tax	159	(1)
Line 74: The gosh darn AMOUNT YOU OWE line	159	(1)
Line 75: Estimated tax penalty (Form 2210)	159	(1)
Finishing Up	160	(1)
Part III: Filling Out Schedules and Other Forms	161	(152)
Itemized Deductions: Schedule A	163	(40)
The Standard Deduction	163	(3)
Older than 65 or blind	164	(1)
Standard deduction for dependents	164	(2)
Itemized Deductions	166	(1)
Separate returns and limits on deductions	166	(1)
But if you change your mind	167	(1)
Lines 1-4: Medical and Dental Costs	167	(8)
Medical and dental expense checklist	168	(3)
Deductible travel costs	171	(1)
Special medical expense situations	172	(1)
Meals and lodging	172	(1)
Insurance premiums	172	(1)
Reimbursements and damages	173	(1)
Special schooling	173	(1)
Nursing home	174	(1)
Improvements to your home	174	(1)
Figuring your medical and dental deduction	174	(1)
Lines 5-9: Taxes You Paid	175	(3)
Line 5: State and local income and sales taxes	175	(1)
Line 6: Real estate taxes	176	(1)
When you buy or sell real estate	176	(1)
The downside of property tax refunds and rebates	177	(1)
Line 7: Personal property taxes	177	(1)
Line 8: Other taxes (foreign income taxes)	178	(1)
Lines 10-14: Interest You Paid	178	(4)
Lines 10-11: Home mortgage interest and points reported to you on Form 1098	179	(2)
Line 12: Points not reported to you on Form 1098	181	(1)
Line 13: Investment interest	181	(1)
Lines 15-18: Gifts to Charity	182	(5)
Qualifying charities	182	(1)
Nonqualifying charities	183	(2)
Contributions of property	185	(1)
Charitable deduction limits	186	(1)
Line 17: (For the world's great humanitarians)	186	(1)
Line 19: Casualty and Theft Losses	187	(1)
Victims of Terrorist Attacks	187	(3)
Do you have a deductible loss?	188	(1)
Figuring the loss	188	(2)
Lines 20-26: Job Expenses and Most Other Miscellaneous Deductions	190	(9)
Line 20: Unreimbursed employee expenses	190	(8)
Line 21: Tax preparation fees	198	(1)
Line 22: Other expenses --- investment, safe-deposit box, and so on	198	(1)
Lines 23-26: Miscellaneous math	199	(1)
Line 27: Other Miscellaneous Deductions	199	(1)
Line 28: Total Itemized Deductions	200	(3)
Interest and Dividend Income: Schedule B (1040), Schedule 1 (1040A)	203	(14)
Part I, Lines 1-4: Interest Income	205	(7)
Understanding Form 1099-INT	205	(1)
Completing lines 1-4	206	(5)
Interest-free loans	211	(1)
Part II, Lines 5 and 6: Dividend Income	212	(3)
Line 5: Name, payer, and amount	212	(1)
Line 6: Total dividends	213	(1)
Your 1099-DIV: Decoding those boxes	213	(1)
Reduced tax rates on dividends	214	(1)
Part III, Lines 7-8: Foreign Accounts and Trusts	215	(2)
Business Tax Schedules: C, C-EZ, and F	217	(30)
Schedule C-EZ	217	(1)
Schedule C	218	(1)
Basic Information (A-E)	219	(1)
Accounting Method Stuff (F-H)	219	(1)
Part I, Lines 1-7: Income	220	(2)
Line 1: Gross receipts or sales	220	(1)
Line 2: Returns and allowances	221	(1)
Line 3: Subtraction quiz	221	(1)
Line 4: Cost of goods sold	221	(1)
Line 5: Gross profit	222	(1)
Line 6: Other income	222	(1)
Line 7: Gross income	222	(1)
Part II, Lines 8-27: Expenses	222	(18)
Line 8: Advertising	222	(1)
Line 9: Car and truck expenses	223	(2)
Line 10: Commissions and fees	225	(1)
Line 11: Contract labor	225	(1)
Line 12: Depletion	225	(1)
Line 13: Depreciation	225	(10)
Line 14: Employee benefit programs	235	(1)
Line 15: Insurance (other than health)	235	(1)
Line 16a: Mortgage interest	235	(1)
Line 16b: Other interest	235	(1)
Line 17: Legal and professional services	236	(1)
Line 18: Office expense	236	(1)
Line 19: Pension and profit-sharing plans	236	(1)
Lines 20a and b: Rent or lease	236	(1)
Line 21: Repairs and maintenance	237	(1)
Line 22: Supplies	237	(1)
Line 23: Taxes and licenses	238	(1)
Lines 24a-d: Travel, meals, and entertainment	238	(1)
Line 25: Utilities	238	(1)
Line 26: Wages	238	(1)
Line 27: Other expenses	238	(1)
Line 28: Total expenses	238	(1)
Line 29: Tentative profit (loss)	239	(1)
Line 30: Form 8829	239	(1)
Line 31: Net profit (or loss)	239	(1)
Lines 32a and b: At-risk rules	239	(1)
Start-up expenses	239	(1)
Operating Loss	240	(1)
Schedule F: Profit or Loss from Farming	241	(6)
Figuring Out Schedule F	241	(3)
Identifying tax issues specific to farmers	244	(3)
Capital Gains and Losses: Schedule D	247	(24)
Collectibles and Real Estate	247	(1)
What Part of Schedule D?	248	(1)
Schedule D: Columns	249	(1)
Calculating Your Adjusted Basis	250	(2)
What's the starting point?	250	(2)
Part I, Lines 1-7a and b: Short-Term Capital Gains and Losses --- Assets Held One Year or Less	252	(2)
Line 2: Enter your short-term totals, if any, from Schedule D-1, Line 2	253	(1)
Line 3: Total short-term sales price amounts	253	(1)
Line 4: Short-term gain from Form 6252, and short-term gain or <loss> from Forms 4684, 6781, and 8824	253	(1)
Line 5: Net short-term gain or <loss> from partnerships, S Corporations, estates, and trusts from Schedule(s) K-1	253	(1)
Line 6: Short-term capital loss carryover	253	(1)
Line 7: Net short-term gain or <loss>	254	(1)
Part II, Lines 8-15: Long-Term Capital Gains and Losses --- Assets Held More than One Year	254	(3)
Line 8: Columns (a), (b), (c), (d), (e), and (f)	254	(1)
Line 9: Enter your long-term totals, if any, from Schedule D-1, Line 9	254	(1)
Line 10: Total long-term sales price amounts	254	(1)
Line 11: Gain from Form 4797, Part I; long-term gain from Forms 2439 and 6252; and long-term gain or <loss> from Forms 4684, 6781, and 8824	254	(2)
Line 12: Net long-term gain or <loss> from partnerships, S Corporations, estates, and trusts from Schedule(s) K-1	256	(1)
Line 13: Capital gain distributions	256	(1)
Line 14: Long-term capital loss carryover	257	(1)
Line 15: Combine lines 8-14 in column (f)	257	(1)
Part III, Lines 16-22: Summary of Parts I and II	257	(1)
Line 16: Combine lines 7 and 15	257	(1)
Line 17: Comparing lines 15 and 16	257	(1)
Line 18: 28 percent gains	257	(1)
Line 19: 25 percent gains	258	(1)
Line 20	258	(1)
Line 21: Capital losses	258	(1)
Line 22: Qualified dividends	258	(1)
Using Schedule D When You Sell Your Home	258	(5)
Computing your profit	261	(1)
Reporting a profit that exceeds the exclusion	261	(1)
Following the home office and rental rules	262	(1)
Use Schedule D for Other Issues Involving Stocks (Worthless and Otherwise)	263	(4)
Worthless securities	263	(1)
Wash sales	263	(1)
Small business stock	264	(1)
Stock options	264	(2)
Short sales	266	(1)
Stock for services	266	(1)
Appreciated employer securities	267	(1)
Using Schedule D for Nonbusiness Bad Debts	267	(4)
Day traders	268	(1)
Mark-to-market traders	268	(3)
Supplemental Income and Loss: Schedule E	271	(12)
Part I: Income or Loss from Rental Real Estate and Royalties	271	(7)
Line 1: Kind and location of each real estate property	272	(1)
Line 2: Vacation home questions	272	(1)
Lines 3-4: Income	272	(1)
Lines 5-18: Expenses	272	(2)
Lines 19-26	274	(3)
IRS math quiz	277	(1)
The tax shelter rules	277	(1)
Part II: Income or Loss from Partnerships and S Corporations	278	(2)
Line 27: The at-risk and other tax shelter rules	279	(1)
Lines 28-32: Name . . . and so on!	279	(1)
Part III: Income or Loss from Estates and Trusts	280	(1)
Lines 33-37: Name . . . and so on!	280	(1)
Part IV: Lines 38-39: Income or Loss from Real Estate Mortgage Investment Conduits (REMIC)	281	(1)
Part V: Summary	281	(2)
Giving Credits Where Credits Are Due	283	(12)
Child and Dependent-Care Expenses: Form 2441 (1040) and Schedule 2 (1040A)	284	(2)
Parts I and II	285	(1)
Part III	286	(1)
Credit for the Elderly or the Disabled: Schedule R (1040) and Schedule 3 (1040A)	286	(1)
Education Credits (Form 8863)	287	(1)
Child Tax Credit	288	(1)
Retirement Savings Contributions Credit (Form 8880)	289	(1)
Adoption Credit (Form 8839)	289	(2)
Understanding the adoption credit and exclusion rules	289	(1)
Figuring out Form 8839	290	(1)
Earned Income Credit (EIC)	291	(4)
Other Schedules and Forms to File	295	(18)
Estimated Tax for Individuals (Form 1040-ES)	295	(2)
Moving Expenses (Form 3903)	297	(2)
Nondeductible IRAs (Form 8606)	299	(3)
Part I: Traditional IRAs	299	(2)
Part II: Conversions from traditional IRAs to Roth IRAs	301	(1)
Part III: Distributions from Roth IRAs	301	(1)
Forms 8615 and 8814, the Kiddie Tax	302	(1)
Form 8829, Expenses for Business Use of Your Home	303	(4)
Measuring your home office	304	(1)
Figuring your allowable home office deduction	305	(1)
Determining your home office's depreciation allowance	305	(1)
Deducting what's left	306	(1)
Form W-4, Employee Withholding	307	(1)
Household Employment Taxes: Schedule H (the Nanny Tax)	308	(1)
Schedule SE: Self-Employment Tax Form	309	(4)
Part IV: Audits and Errors: Dealing with the IRS	313	(64)
The Dreaded Envelope I: IRS Notices	315	(14)
Finding Strength in Numbers	315	(1)
Understanding the IRS Notice Process	316	(2)
Receiving your typical notice	316	(1)
Deciphering a notice	317	(1)
Assessing Assessment Notices	318	(4)
General assessment notices --- the CP series forms and other notices	318	(1)
Income verification notice --- Form CP-2501	319	(1)
Request for your tax return --- Forms CP-515 and CP-518	319	(1)
We are proposing changes to your tax return --- CP-2000	320	(1)
Backup withholding notice	320	(1)
Withholding allowances notice --- Form 6355	321	(1)
Federal tax lien notice --- Form 668(F)	322	(1)
Collection Due Process Hearing	322	(2)
Property levy notice --- Form 668-A(c)	323	(1)
Wage levy notice --- Form 668-W(c)	323	(1)
Handling Nonassessment Notices	324	(5)
Paying interest on additional tax	325	(1)
Receiving a delinquent tax return notice	326	(1)
Appealing the results of an audit	326	(1)
Receiving a Statutory Notice of Deficiency	327	(2)
The Dreaded Envelope II: Audits	329	(10)
What You Must Know about Audits	329	(1)
Surviving the Four Types of Audits	330	(3)
Office audits	330	(1)
Field audits	331	(1)
Correspondence audits	332	(1)
Random Statistical audits	332	(1)
Questioning Repetitive Audits	333	(1)
Getting Ready for an Audit	334	(1)
Winning Your Audit	335	(1)
Understanding the Statute of Limitations on Audits	335	(4)
Extending the statute of limitations	336	(1)
The statute of limitations on tax collection is	336	(3)
Fixing Mistakes the IRS Makes	339	(16)
Pointing the Finger: Common IRS Flubs	339	(1)
Fixing IRS Mistakes: Just the Facts, Ma'am	340	(2)
Sending a Simple Response to a Balance Due Notice	342	(1)
Sending Generic Responses to Generic Notices	342	(6)
Misapplied payments	342	(1)
Misunderstood due date	342	(2)
Wrong income	344	(1)
Exempt income	344	(1)
Double-counted income	345	(1)
Lost return	345	(1)
Lost check	346	(1)
Tax assessed after statute of limitations	346	(1)
Partially corrected error	346	(1)
Erroneous refund	346	(1)
Data processing error	347	(1)
Incorrect 1099	347	(1)
Wrong year	348	(1)
Never received prior notices	348	(1)
Getting Attention When the IRS Ignores You	348	(2)
Getting to know your local Taxpayer Advocate	348	(1)
Meeting the criteria for a Taxpayer Advocate case	349	(1)
Contacting the local Taxpayer Advocate	349	(1)
Finding Your Refund When It Doesn't Find You	350	(5)
How to locate your refund	350	(1)
Uncashed refund checks	351	(1)
Interest on refunds	351	(1)
Refunds and estimated tax payments	351	(1)
Joint refunds	351	(1)
Joint estimated payments	351	(1)
Deceased taxpayer	352	(1)
Statute of limitations	352	(1)
Protective claims	352	(1)
Refund offset program	353	(2)
Fixing Your Own Mistakes	355	(22)
Amending a Return	355	(2)
More expenses than income	356	(1)
The tax benefit rule	357	(1)
When You Can't Pay Your Taxes	357	(5)
Requesting an installment agreement	358	(2)
Making an offer	360	(1)
Declaring bankruptcy	361	(1)
Planning ahead to avoid these problems	362	(1)
Abating a Penalty	362	(6)
The Internal Revenue Manual (IRM)	362	(1)
Court cases that define reasonable cause	363	(1)
Excuses that won't fly	364	(1)
IRS rulings and announcements	365	(1)
Penalty appeals	366	(2)
Abating Interest	368	(2)
When interest is incorrectly charged	368	(1)
Erroneous refunds	368	(1)
IRS delays	369	(1)
When the IRS doesn't send a bill	370	(1)
When the IRS sends a bill	370	(1)
The 18-month rule	370	(1)
Protecting Yourself with Innocent Spouse Relief	370	(3)
Getting innocent spouse relief: Determining if you're eligible under the new rules	371	(1)
Receiving relief by separation of liability	372	(1)
Obtaining equitable relief	372	(1)
Additional innocent spouse rules	373	(1)
The Taxpayer Bill of Rights	373	(2)
The Taxpayer Bill of Rights --- Parts 2 and 3	375	(2)
Part V: Year-Round Tax Planning	377	(102)
Tax-Wise Personal Finance Decisions	379	(8)
Taxing Mistakes	380	(3)
Seeking advice after a major decision	380	(1)
Failing to withhold enough taxes	380	(1)
Overlooking legal deductions	381	(1)
Passing up retirement accounts	381	(1)
Ignoring tax considerations when investing	381	(1)
Not buying a home	381	(1)
Ignoring the financial aid tax system	382	(1)
Neglecting the timing of events you can control	382	(1)
Not using tax advisors effectively	383	(1)
Comprehending the Causes of Bad Tax Decisions	383	(4)
``Financial planners'' and brokers' advice	383	(1)
Advertising	384	(1)
Advice from publications	384	(1)
Overspending	385	(1)
Financial illiteracy	385	(2)
Reducing Taxes with Retirement Accounts	387	(20)
Identifying Retirement Account Benefits	387	(4)
Contributions are (generally) tax-deductible	388	(1)
Special tax credit for lower income earners	388	(1)
Tax-deferred compounding of investment earnings	388	(2)
You can save less money and spend more	390	(1)
Don't go overboard	390	(1)
Types of Retirement Accounts	391	(9)
Employer-sponsored plans	391	(2)
Self-employed plans	393	(2)
Individual Retirement Accounts (IRAs)	395	(5)
Annuities	400	(1)
Taxing Retirement Account Decisions	400	(7)
Prioritizing retirement contributions	400	(1)
Transferring existing retirement accounts	401	(1)
Taking money out of retirement accounts	402	(5)
Small Businesses and Tax Planning	407	(14)
Organizing Your Business Accounting	407	(3)
Leave an ``audit'' trail	409	(1)
Separate business from personal finances	409	(1)
Keep current on income and payroll taxes	409	(1)
Minimizing Your Small-Business Taxes	410	(5)
Depreciation versus deduction	410	(1)
Cars	411	(1)
Travel, meal, and entertainment expenses	412	(1)
Home alone or outside office space?	412	(1)
Independent contractors versus employees	413	(1)
Insurance and other benefits	414	(1)
Retirement plans	415	(1)
To Incorporate or Not to Incorporate	415	(4)
Liability protection	415	(1)
Corporate taxes	416	(1)
S Corporations	417	(1)
Limited liability companies (LLCs)	418	(1)
Other incorporation issues	418	(1)
Where to get advice	418	(1)
Investing in Someone Else's Business	419	(1)
Buying or Selling a Business	419	(2)
Your Investments and Taxes	421	(16)
Tax-Reducing Investment Techniques	421	(6)
Buy and hold for ``long-term'' capital gains	422	(1)
Pay off high-interest debt	422	(1)
Fund your retirement accounts	423	(1)
Use tax-free money market and bond funds	424	(1)
Invest in tax-friendly stock mutual funds	425	(2)
Tax-Favored Investments to Avoid	427	(3)
Limited partnerships	427	(1)
Cash-value life insurance	428	(1)
Load mutual funds and the like	429	(1)
Annuities	430	(1)
Selling Decisions	431	(6)
Selling selected shares	431	(1)
Selling securities with (large) capital gains	432	(1)
Selling securities at a loss	432	(1)
Mutual funds and the average cost method	433	(1)
Stock options and taxes	434	(1)
Selling securities whose costs are unknown	435	(2)
Real Estate and Taxes	437	(16)
Surveying Real Estate Tax Breaks	437	(2)
Mortgage interest and property tax write-offs	438	(1)
Home ownership capital gains exclusion	439	(1)
Home office deductions	439	(1)
Purchasing Your Own Palace	439	(4)
Exploring the tax savings in home ownership	440	(1)
Deciding how much to spend on a home	441	(1)
Tracking your home expenditures	442	(1)
Reporting revenue if you sometimes rent	443	(1)
Making Tax-Wise Mortgage Decisions	443	(3)
15-year or 30-year mortgage?	443	(2)
How large a down payment?	445	(1)
Refinancing decisions and taxes	445	(1)
Selling Your House	446	(2)
Not wanting to sell at a loss	447	(1)
Converting a home into rental property	447	(1)
House sales, taxes, and divorce	448	(1)
Investing in Real Estate	448	(5)
Deciding whether real estate investing is for you	449	(1)
Enjoying rental property tax breaks	449	(4)
Kids and Taxes	453	(14)
Bringing Up Baby	453	(4)
Getting Junior a Social Security number	454	(1)
Childcare tax goodies	454	(2)
Costs and benefits of a second income	456	(1)
Education Tax Breaks and Pitfalls	457	(5)
The (hidden) financial aid tax system	457	(1)
College cost tax deductions	458	(1)
Education Savings Accounts: Tread carefully	459	(1)
Section 529 plans --- state tuition plans	460	(1)
Hope Scholarship and Lifetime Learning Credits	461	(1)
Minimizing your taxes and paying for college	461	(1)
Taxes on Your Kiddies' Investments	462	(5)
Kiddie taxes for children younger than 14	462	(2)
Children 14 and older: Adults to the IRS	464	(1)
Tax-wise and not-so-wise investments for educational funds	464	(3)
Estate Planning	467	(12)
Figuring Whether You May Owe Estate Taxes	467	(2)
Understanding the federal estate tax exemption	467	(1)
Determining your taxable estate	468	(1)
How High Are Estate Taxes?	469	(1)
Reducing Expected Estate Taxes (If You're Rich)	470	(9)
Giving it away	470	(1)
Leaving all your assets to your spouse	471	(1)
Establishing a bypass trust	472	(1)
Buying cash-value life insurance	472	(2)
Setting up trusts	474	(1)
Getting advice and help	475	(4)
Part VI: The Part of Tens	479	(14)
Ten Tips for Reducing Your Chances of Being Audited	481	(4)
Ten (or So) Often-Overlooked Tax-Reduction Opportunities	485	(4)
Ten Interview Questions for Tax Advisors	489	(4)
Part VII: Appendixes	493	(2)
Appendix A: Important IRS Info	495	(2)
IRS Tax Forms and Publications	495	(1)
Recorded Tax Information	495	(1)
TeleTax tax topic information	495	(1)
TeleTax automated refund information	496	(1)
Toll-free tax help	496	(1)
IRS Problem Resolution Program	496	(1)
Appendix B: Glossary	497	(16)
Index	513