Ready, Set . . .Go!
By Robert Wool

(MONEY Magazine) – Your countdown to tax day begins here. First you'll decide to do, or not to do, your own taxes. Then on to: -- A calendar of must-do's from now to mid-April, page 60 -- How to pick (page 64) and use (page 67) a preparer -- Everything you need to collect, page 75 -- The biggest mistakes to avoid, page 83 -- The safest and riskiest deductions, page 89 -- Four tough tax forms made clear, page 90

It only seems hopeless. You against the two-headed monster. You fighting the dread, omnipotent Internal Revenue Service. You standing up to that opaque, ) brain-busting, sleep-inducing, life-and-death nemesis: taxes. It only seems eternal, this battle that starts in January as it has every January of your adult memory. Do not lose hope. What follows are three giant steps that will enable you to slay the monster, win the battle and cut your taxes this April more intelligently and effectively than ever before. First, you've got to overcome your fear of filing. This, as you will see, is a simple process of exorcising from your mind certain irrational and paralyzing terrors that have to do with the IRS and taxes. This, in fact, may be just the year to break the spell. Thanks to a weekend reprieve, the deadline is not the feared April 15 but Monday, April 17. Second, with your mind and vision cleared, you will be able to make a critical decision: whether to do your own return. Or, like 60% of MONEY subscribers, to do your taxes with the help of a professional. Or to use some combination of the two. Third, an act you may never have dreamed possible: you will take control of your tax life. Imagine the scene. There you are, filling up yellow pads with your blinking calculator at your side; or seated at your computer with a brainy tax program plugged in; or, most likely of all, actively managing your tax preparer to be intelligently aggressive in your cause. Three giant steps and you win. Let's consider them more closely.

Giant Step 1: To begin, it might help if you knew that you were not crazy. There are perfectly good reasons for the cold dread and the transcendent headache that strike every time you so much as think about taxes and the IRS. In fact, you are in widespread and distinguished company. Consider Robert L. Nessen -- one of the nation's leading tax lawyers, a teacher of tax law at Boston University and MIT, and the respected creator of multimillion-dollar real estate deals. He confesses that whenever he gets mail from the IRS, even though he pays his fair share of taxes, he breaks into a sweat and starts mumbling to himself, protesting his innocence. This pervasive fear is no accident. The IRS has created it. The service has good reason to suspect that you might well avoid paying some, perhaps even all, of what you owe. The service also reasons that if it can scare you deeply enough and never let you forget that it can punish you severely, you will be a more forthcoming and compliant taxpayer. And so it is no coincidence that as April 15 approaches each year, there are more and more stories in your local paper and on TV about famous people being caught cheating on their taxes. Call it the IRS' education campaign. Millionaire sports and entertainment figures such as John McEnroe and Willie Nelson or publicity mavens like Leona and Harry Helmsley -- all of whom have had fights with the IRS -- command large headlines that draw your attention and start cautionary voices whispering in your mind. You are not imagining the other head of the monster either -- the tax law. It can be numbingly complicated and is getting more so every year. If you have any special situations in your tax profile -- a rental property, passive losses or gains, even the sale of mutual fund shares -- you stand a great chance of making a costly mistake either for or against yourself. Your knowledge of that possibility is why you have a pain in your heart. What you don't know can hurt you.

Giant Step 2: To do your own taxes? Or to get professional help? Or to combine the two approaches? ''It is not the amount you earn that determines whether you should do your own return,'' says David M. Ackerman, managing partner of the Hudson, N.Y. accounting firm Morton J. Glickman & Co. ''It's the complexity of the return. You could be a Wall Street broker making $300,000 a year, but it's all accounted for on your W-2. All your business expenses are reimbursed by your company. You give $5,000 to charity and have an interest deduction on a mortgage. Even if you do make all that money, you may not need me. You can do your own return. On the other hand, your brother-in-law could be earning $50,000 a year but be self-employed in the consulting business -- lots of Schedule C deductions -- maybe hustling a few bucks from a rental property, using his car for business purposes. Now that guy, with only a sixth of your income, he needs me.'' Beyond the numbers and the intricacies of the tax law, there is an important personal component in your decision whether to do your own return: How much can you endure? How good are you at the kind of deductive wrestling needed to understand basic elements of the tax law? You don't have to be a math wizard, but you should feel comfortable with computations and certainly not be math- phobic. (A test: Are you compulsive enough to enjoy doing difficult financial puzzles?) You also need patience to feel your way through the tax labyrinth. With the right personal characteristics and the determination to save yourself hundreds of dollars in preparer's fees, you might well muddle through your return and enjoy a satisfying feeling of triumph. But before diving in, review your tax profile with Ackerman's advice in mind. Just how tough is your return to complete? In the view of many tax specialists, anyone with real complexities who does not turn to a professional for help will, in Ackerman's phrase, ''get killed.'' (See ''Rating the Tax Forms'' on page 91 for a quick reading of the drudgery and frustrations involved in the 15 most commonly used forms.) Ackerman cites as an example the alternative minimum tax, whose intent is that no one with taxable income escapes reasonable taxation. In figuring the AMT, you factor back into your calculations adjustments and tax preferences that you would normally take as deductions or that otherwise qualify as legitimate tax exclusions -- the appreciation on a stock you give to charity, for example. If the AMT is greater than what you come out with on your regular tax computation, you pay the AMT. Notes Ackerman ominously: ''But suppose some poor soul miscalculates his AMT -- it is complicated, even for a professional. He pays his regular tax instead of the AMT. Then a year or two down the road, the IRS comes knocking on his door. Hey, they say, you made a little mistake here. That'll cost you in underpaid taxes plus interest plus our penalty of 25% of what you owe . . . five thousand bucks. And they don't even say thank you.'' Don't think all of this fright talk from professionals is merely their way of scaring you into their offices. No rational soul would deny that the Tax Reform Act of 1986 succeeded in turning the already muddy waters of taxes into molasses. As a sign of good faith, in fact, John Beilsmith, a tax partner with BDO Seidman in Atlanta, and David Rhine, a Seidman tax partner in New York City, recommend an interesting halfway measure: if you do your return, take it to a professional for review. ''After all, it's not like dentistry, where you really can't do it yourself,'' says Rhine. ''This way, you can have the best of both worlds. Save yourself a lot of penalties and sleepless nights.''

Giant Step 3: Amazingly, you are about to take control of your tax life. If you decide to do your return yourself, do not miss pages 90 through 105 in this special report. In ''Keys to the Forms,'' you will get valuable help with four of the most difficult forms, and in ''Your Guide to the 1989 Tax Guides,'' you will discover the best books and software of this tax season. Then get started early. And if you hope to have a professional review your work, have it ready by March 1, after which he is sure to be swamped. If you decide that the task is beyond you, don't just toss all your bankbooks, receipts, 1099s and other records into a box and hand it to your preparer. That is not taking control. That is hiding. You will pay dearly. Push your professional to be aggressive, to interpret the law on your behalf and give you the benefit of any doubt. Never forget the first law of using a tax preparer: yours is only as good as you force him or her to be. There is a good chance, moreover, that your preparer won't want to be aggressive. He might fear IRS preparer penalties or an audit, which you might blame on him and which might cause you to dump him as your tax adviser. He might not even want to discuss much of the return with you. All too often, professionals take the attitude that taxes are too complicated for you amateurs to grasp. The only way you can overcome that Rodney Dangerfield problem is to gain your preparer's respect. Once again, take control. You don't need a graduate degree in taxation, but you do have to ask the right questions. All of the tax articles in this issue of MONEY are geared to providing those questions. And ''How to Work with Your Tax Preparer'' on page 67 reveals the strategies essential to gaining the upper hand. It isn't that hard. As soon as you say to your professional: ''To tell you the truth, I'm very worried about my AMT. Lead me through that, will you?'' -- from that moment on, you will see a new light in his or her weary eyes. Only then does he or she stand a decent chance of complying with the second law of using a tax preparer, to which a surprising number of pros subscribe: over two or three years, a preparer should save you in taxes at least 1 1/2 times what he or she charges you. (While it is impossible to determine a national average, the estimate of Alan Zipp, a Rockville, Md. C.P.A., rings true -- that fees average $400 to $500 a return.) And then you have won. Perhaps for the first time in your tax life -- O ye of little faith! -- you have slain the two-headed dragon. You have won the great tax battle of 1988.

BOX: Check It Out How to tell when you need help

The 1986 Tax Reform Act finally separated the pros from the Sunday afternoon tax amateurs. If one or more of the following hard-to-calculate items fits into your tax profile, you might well consider hiring a professional to do your return. -- Rental property. Figuring depreciation deductions can be brain-busting. -- Passive losses and gains. Even pros get stumped by the still-incomplete IRS rules on net losses and gains. -- Installment sales. When payments and taxes on a property you are selling are spread over a number of years, such obstacles as figuring the property's useful life and the correct gross profit can turn into mathematical black holes. -- Alternative minimum tax. It aims to make every filer pay some tax. Determining how much requires knowing the rules on passive losses, incentive stock options and tax preference items -- and that's just for starters.