THE  WALL  STREET  JOURNAL  TUESDAY,  MARCH  17, 1992

Don't Jump Out the Window

By STANLEY W. ANGRIST

It's the thing we all dread: The official U.S. government brown envelope showing the return address of the District Director of the Internal Revenue Service. Opening it with trembling hands, the taxpayer finds a notice saying he or she has been selected for an audit.

In "Battling the IRS" (Scott Foresman.

271 pages, S16.95 ), David Silverman says the receipt of such a notice is not necessarily a reason to look for an open window on a high noor. He explains that dealing with . the IRS requires the same skills as dealing with any large bureaucracy: persistence and patience. And he provides some com· fort by noting that if you feel mystified by IRS forms, letters and requests you are not alone. He quotes David Pryor, chairman of the Senate Finance Subcommittee on Over· sight of the IRS, who is fond of saying: "As a United States senator. I probably know more about the inner workings of the KGB than I do about the IRS."

One of the most intriguing chapters in Mr. Silverman's book describes what hap­pens when you can't pay the taxes you owe. The good news is that the IRS doesn't use debtors' prison. The bad news is that the agency has a number of other techniques that might influence you to cough up. These Include the authority to garnish your wages, file liens on things you own and seize your bank accounts.

But wait, there is more good news! "Contrary to popular belief that every citizen Is entitled to their day in court, the IRS doesn't have to prove in a court of law that you owe additional tax, penalties and interest before they can commence collec· lion action. They only have to make an assessment of tax and a demand for pay­ment," writes Mr. Silverman. You do have certain rights in dealing with the IRS but you must exercise them. "Silence constl· tutes a waiver of those rights," he notes ominously.

The IRS loves to send out notices. Each year It mails out good news In the form of

26.6 million penalty notices, 3.5 million notices informing taxpayers they didn't report all their Income, 3 million notices to taxpayers stating they failed to file a tax return and tens of millions of notices-the exact number Is not knowable-stating that taxpayers failed to pay what they owed or made a mistake In preparing their tax return. Even better ls the news that In 1988 the General Accounting Office deter· mined that 37% of the IRS's replies to tax· payers' inquiries were either incorrect or irrelevant to the issues raised by the tax· payer. (More recent numbers are not available.>

Fortunately, Mr. Silverman's book provides suggested replies to nearly every type of communication the IRS dispatches. It also tells you when you should seek professional assistance and when you can take the agency on alone.

The late Fred Allen struck a just-right optimistic note about the IRS when he said, "Thank God they're not doing brain surgery."     *   *   *

"To make the election, write 'lump-sum

from Form 1099-R, Box 3. Enter the remaining amount of the distribution !Form 1099·R. Box 2, minus the amount used on Schedule D > on Form l<HO, lines 17a and 17b." That comes directly from the instructions for completing Schedule D in your 1010 instruction booklet.

It should also be a good reason for you to buy an income tax guidebook if you do your own tax return. Even if you don·t, the book provides a source of ideas and checks on how good. a job your tax preparer did in completing your return. The best or these guides Is again "Guide to Income Tax Preparation" <Consumer Re· ports Books, 628 pages, Sl3.95 ). It details in plain English the latest changes in the tax laws. Including an increased tax burden for higher income taxpayers, the total 11011· deductibility of interest on consumer loans and the new filing requirements for homeowner deductions.

Home-office workers will Jove the new form  for calculating  their  business ex-

Business Bookshelf

Tax·time roundup

penses. Form 8829 has several interesting calculations on it, sure to challenge the most jaded of do-it-yourself filers. For instance, it has a proportion calculation to let you figure out what fraction of your expenses is deductible for the office you have in your house.

Taxpayers  who bought,  refinanced  or. more Importantly, sold a home in 1991 might want to consider Julian Block's book "The Home Owner's Tax Guide" tRunz· heimer International, 173 pages, $14.95; available from Runzheimer at 1·800·942· 9949 l. It follows the ins and outs of the tax laws as applied to home ownership.

Many people in 1991 refinanced their mortgages to take advantage of the lower interest rates now prevailing on home mortgages. In the process of refinancing they frequently had to pay "points," a percentage of the amount borrowed under the new mortgage. Mr. Block explains in detail the rules that govern how and to what ex· tent points are deductible.

In a review on retirement books I mentioned that Jane Bryant Quinn's book ''Making the Most of Your Money" in· eludes a set of forms that would be useful to retirees and potential retirees in estl· mating retirement income. Those forms were developed by T. Rowe Price, the mutual fund company, and are available in kit form, without charge, from the company by calling 1·800-541-0295. The company also has software that will take you through the same planning and analysis. It runs on IBM and compatibles and is avail· able from T. Rowe Price for Sl5 by calling l·800·54 l·4<H l.

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