Of the books produced in the past few months to help taxpayers understand the new code, the best strike a balance between reporting what the new law is and explaining what it means.
That is not a simple thing to do. Some authors found challenge enough in reducing the law to a rack-size paperback. Others strained, noticeably, in giving advice on legal niceties that even the tax courts have not interpreted yet.
But Gary L. Klott (with insights from his brothers, two tax attorneys) has written a book that fits as a general reference and an individual guide. Klott is the tax and finance writer for the New York Times, and his "Complete Guide to the New Tax Law" (Times Books, $6.95) is the image of the newspaper itself: good, gray, responsible. It reads like a series of well-crafted news stories--and, in fact, was written in conjunction with 12 New York Times articles titled "Understanding the New Tax Law."
The typical chapter begins with an overview of some new aspect of the law--tax rates, children, investments--and descends into satisfying detail of what the law will mean to the reader.
The book is highly but unobtrusively analytical. For instance, explaining that the new law abolishes the tax break given to millions of Americans who have individual retirement accounts and retirement plans at work, Klott goes on to look for some aspect of the law that balances the loss. He remarks:
"To be sure, some economists and politicians questioned the wisdom of cutting back all these special tax incentives, particularly when the nation's saving rate was already so low. But many economists believe that the lower individual tax rates will help encourage savings and offset the loss of the special tax incentives. You will have less of your interest and dividends taxed away each year." Quiet reasonableness is the hallmark of this book.
"Good News, Bad News" by attorney Michael Savage (Workman, $4.95) is best for a general reader who wishes to bring himself up to speed on the tax code--so as to ask the right questions of his accountant. Savage excels at cutting the Tax Reform Act down to size.
"While the Act is nearly 1,000 pages long," he writes in his reassuring introduction, "less than 200 of those pages have any effect at all on the great majority of people." In fewer than 150 pages of text, he sets out to answer the questions. "Do (the) changes help me or hurt me?" and "What do I do now?" That he largely succeeds is a tribute to his clarity and relaxed approach.
Of course, one can be too relaxed. "The Price Waterhouse Guide to the New Tax Law" (Bantam, $3.95) introduces levity into discussion of one's money in far too many places. As nearly all of the joking occurs in the headlines and subheads that break up the sober text, it seems plausible that the book was written by senior accountants at Price Waterhouse and turned over to a sophomoric editor.
In any event, the book does the service of summarizing changes between the new code and the old with a comparison chart at the beginning of every chapter. It is suitable for the reader who has only time to skim.
A book that is light without being annoying is Paul N. Strassels' "The 1986 Tax Reform Act: Making It Work for You" (Dow Jones-Irwin, $9.95). Strassels worked for the Internal Revenue Service before turning to writing. He produces a newsletter from Washington, and indeed his "Making It Work for You" reads like a newsletter of 160 pages, with the punchy, me-to-you quality of its prose. Half of the book is a thorough but brief rundown of the new code, and half offers advice on new opportunities for tax savings.
The book's value is its sure grasp of what the new law means to individuals. Strassels' material aims straight at the people who are deeply involved in managing their finances and are willing to make changes. It is a book for those who are down to brash tactics.
For example, since the new code has done away with the convenience of investing in a money-losing business and deducting the loss from income, Strassels points out that tax reform has created a deduction for the investor who wants to lose money renting out real estate. There is a catch, however. The investor must manage the properties himself--approving tenants, making repairs and the like. It does not seem to occur to Strassels that an investor who has enough money to throw at a losing business venture might not wish to manage apartment houses. That is an author who believes in his readers.
It is easy to imagine what the people at the J. K. Lasser Tax Institute had in mind when they brought out "What the New Tax Law Means to You." They wished to be first in the marketplace with a book about the new code. They probably succeeded--the book was published in October--but inevitably the work describes its subject better than it explains it. Without graphics, pages and pages are wasted describing changes that, more thoughtfully presented, can be seen at a glance.
For a good overview of the new code, a much better value is found in some of those hefty guides one used for filling out tax forms under the old law. All of the ones with "1987" on the cover are actually for the past tax year but contain good and, in some cases, excellent supplemental material to explain the tax changes that are now taking place. Also, the best of these guides are really reference books on the tax system, and they will be serviceable in the current tax year and probably the next.
Indeed, "The Arthur Young Tax Guide 1987" (Ballantine, $10.95) is a veritable home course on taxation. Where some guides give potshot advice, this one simply explains everything, and in a unique way. It copiously reproduces text from the Internal Revenue Service publication "Your Federal Income Tax" and annotates the text with shaded blocks of comments, examples and tips. Given two points of view, the IRS' and the book's, the reader works out his own position and likely comes to understand taxation in the process.
The book highlights the new code in an introductory chapter, and in the rest of its 644 pages it emphasizes planning for 1987 as a transitional year.
For instance, discussing business car expenses for the past tax year, the book quotes the IRS on deductions allowed for leasing a car. Then, in light of the new code, it compares leasing to buying. Beginning this year, the book points out, "you can only deduct . . . interest if you are self-employed and use your car in your trade or business. Therefore . . . you should consider leasing a car rather than buying it so that you can deduct your lease payments (which are substantially equivalent to the depreciation and interest)."
The Arthur Young guide is spaciously presented and well organized, with special chapters for homeowners, investors, the self-employed, the business executive and so on.
Equally well presented, and more readable, is the "Income Tax Handbook" (Penguin, $9.95) by Mary L. Sprouse, former IRS group manager in Los Angeles. Although it was published a month before the new law was enacted (on Oct. 22), the book explains all the essential changes. Its highlight chapter is better than the Arthur Young guide's: longer, clearer, with effective graphics and much-needed checklists of which items have been repealed by the new code and which remain unchanged.
Sprouse deserves credit for attempting to write vividly about taxes. Deep in the book, she discusses the investment tax credit, whereby a part of the cost of new machinery--for the individual, read "car or home computer"--could be subtracted from the tax bill. The new code repealed the tax credit, and Sprouse compares this loss to a blank museum wall "where a masterpiece used to hang."
Instead of a glossary, the handbook includes such unusual back-of-the-book stuff as a survey of tax software and discussions of IRS penalties and audits. Sprouse, incidentally, was an instructor of IRS auditors and personally audited 1,000 returns.
The IRS, it should be noted, has its own booklet explaining the new law. "Highlights of 1986 Tax Changes" (Publication 553, free) is available through the mail by telephoning the IRS or as a handout at any IRS publications office. It does a fair job of explaining how the new law differs from the old, but naturally it offers no advice on planning for tax savings or taking advantage of the new law.