Although I feel pretty competent in most areas of personal finance I must admit that I don’t feel particularly comfortable when it comes to filing my taxes. A few years ago it wasn’t so difficult, but these days with multiple jobs, income streams and rental property, tax time can get pretty complicated. So when I was offered a free copy of The Tax Lady’s Guide to Beating the IRS I jumped on the opportunity to read it.
The author, Roni Lynn Deutch, takes the agony out of reading about taxes and tax preparation. In fact, for such a dry topic the book is remarkably easy to read. Deutch prepares readers for a boxing match with the IRS, by helping them understand the tax laws in detail.
In Round One the author provides a background of the history behind taxes. She includes interesting information on tax evaders who have been caught and sentenced and points out that far too many tax payers receive refund checks each year, which is equivalent to giving the government a short-term loan.
In Round Two Deutch discusses the importance of solid record keeping. I think this is an important and often overlooked topic. After all, you can’t fight the IRS if you can’t prove your charitable contributions, childcare expenses, health expenses, etc. Deutch provides long lists of documents you should save along with the time-range for saving them. If you read only one chapter in this book, I think this chapter is the one to read.
In Round Three the author details the definitions of earned, unearned, taxable and non-taxable income. She also lists and defines the various filing status categories and discusses marginal tax rates in detail.
In Round Four Deutch walks readers through the 1040 form line by line, providing very clear definitions for the various credits and deductions.
In Round Five the author explains the difference between deductions, exemptions and credits and how they apply to the amount of your overall tax bill. She then breaks down the three categories and provides examples and definitions of each type.
Round Six is devoted specifically to those who are self-employed. She includes details on specific tax breaks such as home offices, automobile expenses, travel expenses, etc as well as information on extra expenses like paying for your share of social security taxes.
Round Seven includes the tax implications for saving for college. In this chapter Deutch lists details about College 529 Plans, Coverdell savings accounts, prepaid tuition programs and Roth IRAs. This chapter also focuses on various credits like the Hope Credit and the Lifetime Learning Credit, as well as non-taxable gifts and the ‘kiddie tax.’
In Round Eight Deutch focuses on investment accounts. This chapter includes items such as dividends, capital gains and interest, and provides details on the tax implications of each. This chapter also focuses on retirement planning and includes details on the various types of retirement accounts like 401(k)s, 403(b)s and the various types of IRAs. Deutch also includes details about home ownership, mortgage interest, points, rental and vacation properties.
In Round Nine the author focuses on the preparation for tax day, which includes when to file, how to file an extension, amend your return and even how to pay your taxes or receive your distribution check.
Round Ten focuses specifically on how to avoid, prepare and survive the dreaded IRS Audit. She lists red flags that the IRS might hone in on and includes additional information on which papers to retain and store in case an audit occurs. This chapter also includes details on what it means to owe the IRS money and how the IRS will collect. In this chapter Deutch also urges tax payers to double, triple and quadruple check their math to avoid an audit in the first place.
In Round Eleven Deutch helps readers decide whether or not they need to hire a tax professional. In essence, the decision boils down to factors such as the complexity of your sources of income and deductions.
Lastly in Round Twelve Deutch provides 50 tax tips. Most of these tips include simple things like, #5 – Keep the Essentials, which include pay stubs, W2s, receipts for deductibles, insurance and medical records and charitable contributions and #24 – Collect Your Charity Receipts.
All in all I thoroughly enjoyed reading The Tax Lady’s Guide to Beating the IRS. Although I read the book from cover to cover I think it would also make a great tax reference.