(FORTUNE Magazine) – Few things can clear a room full of people faster than the mention of taxes. And with today's bullish economy creating new wealth in the form of soaring Internet IPOs and valuable stock options, taxes seem more complicated than ever. So FORTUNE gathered five of the sharpest tax lawyers and accountants around to help demystify America's most dreaded obligation.

Attorneys William Zabel and Daniel Shapiro, who are both partners at Schulte Roth & Zabel in New York, shared their expertise on high-net-worth individuals. Joe Votava, a partner at the law firm of Nixon Peabody in Rochester, N.Y., and president of the International Association for Financial Planning, focused on personal finance, while Jere Doyle, first vice president at Mellon Private Asset Management in Boston, explained the ins and outs of retirement plans. Finally, Charles Cangro, who specializes in estate and business succession planning, offered insights gleaned from his nine years at the accounting firm Ernst & Young. Here's what they had to say:

Given the current economic landscape, especially all the money being made on IPOs and in the stock market, what are the main issues that your clients have been confronting?

Cangro: With the success of Internet companies, very young folks are acquiring a large amount of wealth. There are dilemmas associated with doing planning for these individuals, who are so young and so early on in their lives. For example, if you're 30 years old, recently married, and don't have any children, it's difficult to do any long-term estate planning. Plus, young entrepreneurs are more likely to liquidate their holdings and move on to other ventures. That means they could face large capital gains taxes.

Shapiro: I've also seen the problem of big capital gains, whether it's from an IPO or just from long-term holdings.

What are some of the things people should do to protect their 401(k)s and IRAs?

Doyle: First of all, they should do some planning upfront. For example, if they have a spouse, they should name the spouse as the beneficiary so the spouse can avoid estate taxes when the IRA owner dies. When people name their children as beneficiaries, they're really shooting themselves in the foot, because then the marital tax deduction doesn't apply.

Cangro: A surprising number of people don't participate in their 401(k)s because they find them confusing. In my opinion, if you can afford to invest in a 401(k), you should. It definitely makes sense because of the tax advantages.

What else should people be doing in terms of their IRAs?

Doyle: For starters, they can withdraw money any time after they are 59 1/2. After paying income tax on that withdrawal, they can then use the proceeds to purchase life insurance in an irrevocable life insurance trust. When the IRA owner dies, the life insurance proceeds will go to the irrevocable trust, and the trustee can use the insurance money to pay the estate tax that is normally due on an IRA at death. It sounds complicated, but this strategy is better than paying taxes directly out of the IRA because it preserves the principal in the IRA while gaining assets from the insurance policy.

Are there any income tax shelters left that people should think about?

Shapiro: One of the tax shelters that is still around is just a straight gift of appreciated assets to charity. It surprises me that more people don't use it. Also, people who have to borrow are using home-equity loans, rather than other loans, so that they can benefit from the interest tax deduction. Interest payments on home-equity loans of $100,000 or less are tax deductible.

You mentioned the home-equity loan. Does it make sense for people whose kids are facing college to take a home-equity line of credit instead of a regular bank loan?

Doyle: If you can't qualify for a government-backed college loan, a home-equity loan makes sense, since borrowers don't get a tax deduction on a regular bank loan.

Are more and more people turning to home-equity loans for a handy tax deduction?

Doyle: Really, people are using the $100,000 home-equity loan for everything, whether it's to buy a car, to buy a boat, to take a trip to Las Vegas, or to educate their children. It's a catch-all, and it's not as if you need to use the money on your house for the interest to be tax-deductible.

What are you seeing in terms of the alternative minimum tax (AMT)?

Cangro: The AMT is one of those good-news, bad-news stories. The good news is that long-term capital gain rates came down to 20%, but the bad news is that the reduction in the capital gain rates has increased the snare of the AMT.

Votava: If you have incentive stock options and don't go through proper tax planning when you exercise them, it's possible the bite from the AMT could be pretty significant. That's something to look out for.

Cangro: People typically fall into the AMT because of a combination of factors. If you have an unusually large amount of long-term capital gains in a year and pay a lot of state and local income taxes, it's a good possibility that you'll qualify for the AMT.

What about the merits of giving an IRA to charity?

Doyle: Charities love it, of course, and it's a good estate-planning tactic. If I name the charity as my beneficiary at the time of death, I will not owe income tax on the IRA, nor will the charity. In addition, I will receive a charitable deduction on my estate taxes. However, if I give my IRA to, say, Boston University while I am still alive, I will be taxed on it.

Zabel: You can also get a nice tax break, without having to die first, by giving stocks to charity. Rather than giving cash, you donate appreciated stock. That way you forever avoid taxes on whatever capital gains there are, plus you get a deduction for the full market value of the stocks.

In terms of the auditing process, what things have changed significantly in recent years?

Votava: With a mainframe system that's not Y2K-compliant and with inefficiencies in its electronic-data system, the IRS is woefully undermanned. That means they are not auditing, and this is causing taxpayer complacency. Careless taxpayers will pay the price for that in the year 2003 or 2004, when the IRS systems are going to be much improved. Enhanced electronic surveillance will lead to a greater number of audits.

Shapiro: I am constantly amazed at how few taxpayers in high brackets are audited.

Cangro: We have, however, seen an increasing tenacity on the part of the IRS with estate and gift-tax audits.

Zabel: I agree with Charles about gift-tax audits. I think the IRS has been watching gifts much more closely.

Are there reasonably easy deductions that many people neglect to make?

Votava: People should use appreciated property instead of cash when making charitable donations. That way they can receive a deduction for the market value of the property but avoid paying the full capital gains tax on the appreciation.

Shapiro: A lot of people think they automatically get a deduction for expenses the IRS classifies as miscellaneous itemized deductions. Before they can deduct these payments--things like investment advisory fees, financial advisory fees, legal fees, accounting fees, or tax preparation fees--expenses collectively have to exceed 2% of that person's adjusted gross income, and then only the excess portion is deductible. These payments are not deductible for people who fall into the AMT.

Do day traders and people who trade a lot of stock online have special issues to worry about when it comes to taxes?

Shapiro: I think there are complicated rules that day traders probably either aren't aware of or simply ignore, like wash sale rules. Unless they're dealers in stocks and securities, they may be unaware that they can't sell a stock at a loss, buy it back the next day, and then claim the loss on that sale at the end of the year. Traders can avoid wash sale rules if they elect to report all of their gains and losses for the year, regardless of whether they were realized.

Cangro: Because of the increase in volume and frequency of trades, it is easier for people to lose track of their records. There are some relatively inexpensive software packages that help track trades. Even so, people should still physically record information. I expect that someone will come up with a way to manage all this pretty soon, either on the Web or through a software program.