Color of Money Book Club

Michelle Singletary
Washington Post Columnist
Thursday, May 24, 2007 12:00 PM

Michelle Singletary will host an online discussion with tax attorney Scott M. Estill, author of "Tax This! An Insider's Guide to Standing Up to the IRS" (Self-Counsel Press, 2007 edition, $21.95), which was the the May Color of Money Book Club selection.

In her column from May 6, Michelle writes: Many tax situations deteriorate because people don't know about the options available to them. If you are facing an audit, haven't filed a tax return in years, or received a tax bill from the IRS, pick up "Tax This!"

Submit a question or comment now or during the discussion.

Read Michelle's past Color of Money columns.


Michelle Singletary: Good afternoon everyone. Already there are some amazing questions. So let's get started.


Little Rock, Ark.: I have been under extreme stress from my job for the past 3 years, and did not file a tax returns in 2004. However, I paid all estimated taxes, plus a little bit more to be sure that I wouldn't owe a penalty. This year I finally got myself treated for stress and was able to get myself together to file my delayed tax return. I am being told that the IRS doesn't have to give me the refund that I am due from 2004, not even the extra money that I overpaid so as not to face a penalty from my late filing. Is there a way that I can appeal this?

Scott M. Estill: Hello Little Rock! You have three years from the due date of the tax return to file a return and claim your refund. If this was for the 2004 tax year, it was due April 15, 2005 and you thus have until April 15, 2008, to file and claim any refunds. If it was for the 2003 tax year for which the return was due on April 15, 2004, this reurn was due by April 15, 2007, and you may be late to claim any refunds. However, if you filed an extension you still may have time for 2003. Do not give up here! Scott


Boston, Mass.: Hi Michelle. I love your no-nonsense advice. Earlier this week I got a letter from Citi saying that since I hadn't used my card in a long time (10 years or so) they were canceling it. That's fine, since it had the highest rate of my three cards. But, I'm wondering if there could be a downside to this. It was one of two cards that I got in college (I'm 34 now). I stopped using the other one at about the same time. Since the other card is a Citi card as well (through a merger with AT&T Universal) I'm thinking that they will do the same thing with that one too. I'm now using a better card with a lower rate, higher limit, and better rewards, so is there something that I should be worried about? No major purchases on the horizon, so a drop in my credit score won't be disastrous. Do you know how long it will be before that will be a non-event and the score goes back to where it was? Should I cancel the other card if I think they'll be doing it for me any day now?

Thanks for your help!

Michelle Singletary: Unless you are going to get major credit soon and since you don't have any outstanding credit balances, I wouldn't worry about the company canceling the first card. Same with the second. Your score may drop a bit but if you continue to pay your bills on time you should be fine.

I think it's a tactic to get folks like you, worried about keeping a good credit score, to start using the card. Don't fall for okie-doke.


Chicago area, Ill.: A friend of mine read in the Wall Street Journal this year that starting with filing Tax Returns in 2007 the line item deduction where you fill in for non-receipted cash contributions will be eliminated. Is this true? Having a family of 6 and being frequent Church goers throughout the year where we offer at minimum $15-$20.00

cash contributions just for Sunday Worship services not having this deduction which yearly amounts to over $1,000 +/- would be missed and going to check writing is not only cumbersome for us but to the parish council who has to account for all this.

Thank you,



Scott M. Estill: HI Ernest- I ahve not read that the IRS is eliminating this line but they have made a change and stated that all cash donations must be backed up with a receipt. Thus, unless your church will give you a receipt for your cash donations, you will need to pay by check or credit card so you have proof of this in the event of an audit. While this is a hassle, the IRS states they are doing this to prevent abuse! Scott

Michelle Singletary: If your church doesn't already do this you may suggest they keep giving envelopes to keep track of cash gifts. This way you can still give cash but in an envelope in which they will keep track of your donations. Then at the end of the year you would get a report of all your giving.


Sterling, Va.: I have a small amount of credit card debt (under $1500) and a budget plan for paying it off. I also have a plan for putting a percentage of each paycheck into a regular savings account (right now it is too small an amount to contribute to any higher yield account.) One friend is telling me I shouldn't save anything right now, that I should contribute that "savings" money towards my credit card debt since I loose more in credit card interest than I would gain in savings account interest. My mother says I should always save, no matter what, even if I am in debt. What do you recommend? As always, love the chat!

Michelle Singletary: I say listen to your mommy. Mom knows best. Your friend is totally, utterly, absolutely wrong.

When you are in debt you still have to save. If you don't guess what happens?


And if you have no savings you get sucked into using credit.

So definitely continue to save, while aggressively paying off that credit card debt. Be sure to really comb your budget for ways to cut expenses so you can cut the time you pay off that bill even shorter.


Hyattsville, Md.: I've taken your advice, Michelle, and my husband and I are (finally!) going to see a financial planner on Friday! Part of why we're going is to see if there's a way we can reduce our tax liability, even though money wise we're probably small potatoes. I do have one piece of tax advice, though - my husband and I bought a relatively small house in Hyattsville's historic district over four years ago. When we put a new roof on last year, we took the time to fill out the application for the state's Historic Preservation Tax Credit. This year?? The state is refunding us over $5,000 - we got a free roof!! How cool is that?

Scott M. Estill: These housing tax credits are very nice because they offset taxes dollar for dollar as opposed to a deduction which offsets tax liabilities only to the extent of the tax bracket (i.e. 35% maximum for a deduction versus 100% for a credit!). Scott

Michelle Singletary: Oh that is so totally cool. Good for you.


Laredo, Texas: Approximately how many non filers are there? Percentage to total? Tax dodgers or what other reason may they have?

To all, a great day and may it continue for the upcoming Memorial Day weekend from South Texas!

Oliver G

Scott M. Estill: Oliver- the IRS estimates that about 10% of all US residents are non-filers- maybe for only one year or maybe for several but the number is very high- of course, all of us who file end up subsidizing the non-filers! Scott


Alexandria, Va.: I'm not sure how books like this are helpful. The implication that one has to "stand up" to the IRS only reinforces the unfortunate stereotype that tax collectors are jackbooted thugs, when in reality those who fail to pay their taxes are the real criminals. I'm all for knowing every valid deduction, credit, or exemption -- and I don't fear an audit because I actually believe an agent would be more likely to find errors in MY favor. But if the IRS has come knocking on the door, in all likelihood you have failed to live up to your responsibilities as a citizen. People don't need to be empowered to "stand up" to the IRS -- they need to be educated to fulfill their responsibilities as productive citizens of this country.

And no, I don't work for the IRS or in the tax profession.

Scott M. Estill: I actually like most of the IRS employees and in fact I am an ex-IRS employee myself! However, all taxpayers need to be aware of their rights and this book attempts to help people understand these. Your opinion may change if you were caught in an IRS mess due to no fault of your own! Scott


Washington, D.C.: Michelle: please alert your readers that the IRS has turned over tax debt collection to private companies, the industry with the largest number of complaints to the FTC. There was a big hearing about it yesterday held by the House Ways and Means Committee. Not only do the companies get to keep a percentage of the money they collect (our tax dollars, not private dollars) the taxpayer's private information - including Social Security number! - is being turned over to third parties. By the government.

If you are in arrears to the IRS, you could start getting calls from private firms. There's a website tracking what's going on at the IRS. Of course you should pay what you owe, but be careful with who is trying to collect it.

Scott M. Estill: I agree- be very cautious- the IRS just reported that they are actually losing money with these private firms and it would be cheaper to do it in house. So much for Governmental efficiency! Scott

_______________________ Spending Tax Dollars to Collect Them (By Michelle Singletary, Sept. 7, 2006)

Michelle Singletary: I did alert my readers.


Washington, D.C.: I just saw on the ABC news last night that the IRS is using Private Debt Collectors to collect back taxes. What is your opinion of this and what do you recommend if we get contacted by one?

Scott M. Estill: I believe this is a very bad idea, as I have strong doubts that these private collection agencies will be "taxpayer friendly" and will use whatever means necessary to collect the taxes. We have had a few dealings with them and they simply do not want to listen to anything, especially if we are disputing the tax bill. I would attempt to work with them and if that fails, immediately go to your local Taxpayer Advocate (inside the IRS- they are still IRS employees but have a lot more powers than your typical IRS employee- a contact list is available at Scott


Richmond, Va.: Hi, Michelle,

This isn't relevant to this month's book, but I hope you'll have time to take my question anyway. My boyfriend recently co-signed on a house loan for a friend of his. I agree with you that co-signing is rarely a good idea, but it's his money, so there's really nothing I could have done about it.

It got me thinking, though - I would be held liable for that loan if we got married, wouldn't I? Is it possible for him to take his name off of the loan if his friend's credit improves or for his friend to find another co-signer to replace my boyfriend? I don't know if we'll go the distance, but I also don't like the idea of waiting 30 years for someone else's house to be paid off.

What should I do? (in addition to buying your book, that is!)


Michelle Singletary: Well, definitely buy my book "Your Money and Your Man" out in paperback now.

In the book you will see that since you are just his girlfriend now you shouldn't worry about this. Just take note. And I mean take note that your honey is willing to put his financial life on line for a friend. That may seem all nice and everything but doesn't speak well of his common sense. Co-signing is not "rarely" a good idea. It's never a good idea unless you are married.

When you co-sign you are wholly and equally responsible for the debt. Not half. All of it. If the person pays late that impacts your credit. Your boyfriend also has now limited his ability to borrow and possibly buy his own home because on paper he already is obligated for a home.

But to answer your question, you would not be liable for the loan as his wife. Only your foolish man.


Palm Coast, Fla.: My wife and I are retired at 65 and 69 years old and we would like to begin investing some money to avoid paying higher taxes.

How do you feel about our investing about $10,000 to start in a Roth IRA ?

Thank You,


Scott M. Estill: This is a very good tax strategy because Roth IRAs are not taxed when the money, including investment income, is taken as distributions. However, given that you stated you were retired, please be aware that you must have at least $10,000 in "earned income" (income which is subject to Social Security tax withholdings) before you are legally permitted to make an IRA contribution- if your earned income was $5,000 combined, your maximum contribution would be $5,000 and not $10,000. Scott


Washington, D.C.: I've heard that beginning in 2007 the IRS now requires actual receipts for small cash donations (e.g., weekly at church, donation boxes at museums) claimed on Schedule A. Is this true? If so, how do you handle donations to groups, such as my church, that unlikely to provide the paperwork I need?

Scott M. Estill: Yes this is true- I would advise to pay by check or credit card to have a paper trail in case you are audited. Scott

Michelle Singletary: If you keep good records of what you pay, keeping a paper trail you shouldn't have a problem.


Providence, R.I.: I recently caught up with all my tax returns. However, the IRS has indicated that I've passed the "statute of limitations" so am no longer entitled to about $13000 in refund money. How can I fight, dispute or negotiate with them to get some of this back?

Scott M. Estill: If the funds were paid in more than three years ago, you cannot fight this because this is the law. If the funds were paid in more recently than this, you may still be in luck. Scott

Michelle Singletary: Yet another reason why it's so important to file your tax returns every year.


Norfolk, Va.: I am simply amazed at people like you who have the public attention and do not take a strong position against evil organizations like the IRS. An agency that is setup by evil white men to take money from the people and give to their government to waste on their special interests. It is just un-Godly what they are doing with our money, and again people that you do not say anything, which ends up supporting what is wrong.

Let's get the flat tax in place, and we will not need the IRS at all. No filing a stupid report telling the evil government how much you are earning.

Scott M. Estill: Many of the problems with our tax system are the fault of Congress (passing bad laws or laws we cannot understand). This being said, the IRS is a very dysfunctional organization and I agree that eliminating the current tax system and starting over, with a flat tax or some other version, would be an improvement. However, with any tax system there will be people who will cheat or push the envelope and thus something like our current IRS would still need to be in place to monitor this. What politicans don't say is that the IRS, in some form or another, will still be around even with a flat tax. Scott

Michelle Singletary: I know you aren't implying I'm supporting evil. I'm so against evil.


Atlanta, Ga.: Hello Michelle:

I love your column and television show and appreciate all the sound advice you give regarding sound financial management. My husband and I lost about $25000 on a real estate renovation project and are desperately trying to rebound from the fall out. We are trying to cut corners here and there to pay back the second mortgage and other related credit debt. What advice can you give to us (I've asked him if we could appear on your show, but he doesn't want that much visibility into our private lives). I realize that a lifestyle change is completely necessary, but am not sure just how or where to start. Please help.



Michelle Singletary: You poor thing. I'm so sorry. But in I hope others take note that real estate investing, renovation etc. is not a SURE THING.

And you know what. You start over by starting over. Don't look back other than to remind yourself of your mistakes so that you don't make them again.

Going forward you get out of debt two ways by cutting expenses or increasing your income or both.

So perhaps both of you or one of you could get a part-time job. Also look at at what you can cut. Maybe you need to take in a border if you can't get part-time jobs. Mostly take it one day at a time, one bill at a time. Start with the debt with the lowest amt. It will feel great to get rid of that and give you a push to continue.

Good luck.


Lanham, Md.: Is it true that you have to keep a mortgage in order to lower your tax base? I have heard both sides to this story and would like to know if it's better to pay off the mortgage early or keep the mortgage going and keeping the money liquid.

Scott M. Estill: Interest paid on a mortgage is tax deductible and thus this produces a nice tax deduction on Schedule A for itemized tax deductions. Whether you are better off to pay it off or keep it is a financial planing question and usually the answer revolves around the interest rate you are paying, the tax savings by having a mortgage and the potential rate of return for any investments you would make instead of using the $ to pay off the mortgage. I am not a financial planner and would advise you to seek one in your area to help as this question can be very individualized depending upon your specific facts. Scotta

Michelle Singletary: I don't have enough space to address this but I think it's crazy that so many people have been duped into thinking that keeping a mortgage for the tax break is smart. I even had one couple who inherited a home write in to say their "friends" were telling them they should get a mortgage for the tax break.

Have we all gone mad!

Think of all the mortgage interest you will save by paying off your mortgage. Think of the freedom. Yes, those folks with degrees and financial investment products to push will tell say you're fool not to look at the interest rate spread.

But I'm telling you the world as we know it in this regard is wrong. What they don't account for is risk. What if the investments don't return what you think? What if you lose your job, get ill, have a kid or whatever. Not have a mortgage gives you choices (as long as you have savings as well. You don't want to be house rich and cash poor).

For me I'm bucking the system. I've got one last debt to get rid of -- my mortgage -- and I'm going for freedom.


To Norfolk: If you truly believe that the government is so evil that sending any tax revenues to it is supporting evil (a markedly shortsighted narrow view, in my opinion), you can do some searches on "tax protesters" who deliberately keep their income below federal taxation thresholds. You could move to another country where tax rates are lower.

Or you could spend your energy expressing your views to your local, state, and national representatives and act like a citizen of this republic.

Scott M. Estill: I agree that working with your Congressional reps is the way to get this tax system monster fixed. Just do not expect any miracles as it has taken nearly a century to create this mess and it is unlikely to be "fixed" in a short period of time. Scott


Washington, D.C.: Sir, I'm curious as to where I would go to find the law the requires DC residents to pay Federal Income Taxes. As you know DC is not a state, and residents of Indian reservations and the territories (for most circumstances) do not pay Federal Income Taxes, because they are not states and do not have representation in Congress.

Thank You.

Scott M. Estill: Basically all US residents are required to file unless there is a specfic exemption. The Native Amercians have an exemption for certain tax filings and this is why they are excluded. If I could find a law which would exempt Washington DC I would become your neighbor in a second! Scott


Los Angelos, Calif.: Mr. Estill,

I read your book Tax This! I have to say it is one of the most informative books I have read in a very long time. Do you have a web-site so I can see where you are speaking or what you are currently working on?

Scott M. Estill: Hi LA. I have two web sites available and please check out and for my speaking engagements and other books. Thanks, Scott


Arlington, Va.: Hi Michelle,

A comment then a question. Whenever I feel like acquiring new stuff -- I read your columns to remind me that I don't really need it, and can't afford it!

When buying a car, do you recommend new or used? If I have $20K to spend, is it better to buy a lower end new car, or a higher end, gently used?


Michelle Singletary: If you're talking about $20,000 is in cash you could get new or used. For years I bought used. Let someone else take the hit.

Now recently after many used cars my husband and I bought new. BUT we had no other debt. Paid cash. Have tons in savings, college funds, retirement funds for ALL three kids, tithe, are helping nieces go to college etc.

I felt my hubby should get the color and style and the exact options he wanted after having to live with one of this country's biggest penny pinchers.

So if all your other financial things are in place and you see a new you really want and you plan on keeping it for years and years get new. If you want a high end that you can get used for that $20,000 in cash. Go for it.



Borrowed $50K from 401K plan in '06 and was out of a job seven months later, loan defaulted in early '07.

I am currently working and contributing to 401K. Hoping to contribute $11k by year-end. Also plan on contributing $4K to IRA once I receive IRS refund. What else can I do to minimize '07 taxes.

Scott M. Estill: Having a small business or rental properties typically helps. You should also watch your itemized tax deductions and bunch them in 2007 to obtain a greater tax savings (such as accelerating any medical treatments, paying your State estimated taxes in december rather than Janaury) and the like. One theory we go by is to defer income as long as possible and accelerate deductions as much as possible to get the most in tax savings this year. Scott

Michelle Singletary: Well sounds like you are listening now. That's what counts.


Bethesda, Md.: Hello,

I was told last year that in order to receive tax deductions for charitable contributions it needs to be over $5000, by H and R block. is this true? have tried to confirm w/ others but no one seems to know (and would rather not be charged $100 for a measly question!). BTW, I rent and do not itemize but receive deductions on rollover IRA, TSP, CFC, and flexible health spending.


Scott M. Estill: No this is not true- all charitable donations are tax deductible as long as you can itemize tax deductions (and have proof of the donation). H & R Block may have been saying that you need at least $5,000 in total itemized deductions before it is worth it- even though you rent, if you pay any State or Local income, property or other taxes these are also deductible and get added to your charitable donations. Scott


Arlington, Va.: Michelle,

I know you wanted to do everything you could to keep last week's poster (with the graduating niece) out of debt.

But I believe that insuring your future income and maintaining your current health are equally important.

So I would tell the niece more than "mix and match": her office may require professional attire as a condition of employment, and plenty of graduating college students have but one decent suit. I would have recommended that she look at consignment shops and summer sales, to try and save money (with perhaps one more suit, some nice dress slacks, and blouses). At any rate, she probably will need to buy -some- clothes to make the impression that she needs to be taken seriously at her job. It's not worth being thought of as "the inappropriately dressed kid" and losing out on potential projects and raises because of it.

Also, nothing is worth risking her health. Most people need a good night's sleep to stay healthy, and a pile of blankets just doesn't cut it. Also, there is a bedbug infestation on the East Coast, so used mattresses are probably not the solution. She should look into this weekend's mattress sales, get a decent bed (for $400-$500), and YES, consider doing 12 months no-interest and making darn sure that she puts the payment aside every month.

I know you want to help, and encouraging the family to chip in was the right call, but there are some things worth spending money on.

Michelle Singletary: Well, I said she shouldn't take on debt for clothes and furniture and I stand by that. I didn't say the woman shouldn't have clothes. I said don't charge them even if that means wearing that one suit mixing it with other items. Today very few young people graduating from college have just one suit. Come on.

And I slept on the floor until I could afford to buy a mattress with cash and lived to tell about it.

See it's these things people tell themselves to go into debt.

All I'm saying is live within your means especially when you start out in life and you set the stage for a lifetime of smart financial moves.


Alexandria, Va.: Is a cancelled check sufficient to support a charitable deduction? For example, in the law passed last summer having a payroll deduction is no longer sufficient to support a charitable deduction. You must have a receipt from the organization even thought the deduction through a payroll which you would normally expect would be sufficient documentation.


Scott M. Estill: Yes this will work- as long as the charity is identified on the check you have proof. Scott


New York, New York: Hi Scott,

I was at one of your asset protection seminars in New York about a year ago. Do you have a Web site that I can see when and where you are speaking?

Scott M. Estill: or Thanks, Scott


Woodbridge, Va.: Hey Michelle,

Glad to see your chat today!

Recently my husband and I faced a financial situation where a family member offered to loan us money, interest-free, to cover the cost of getting a new car. Fortunately we were able to repair the old car and did not need to think about incurring more debt. I had an immediate negative reaction to borrowing money from family. To me it just seems wrong on many levels-I would feel "beholden" even though this family member would never do anything to make us feel this way; if we needed to borrow money to get a car then we really don't need a car; that I feel our finances are private and I feel weird letting family members know we might be in financial "trouble". Am I overreacting?? My husband thought I was nuts, that getting money interest-free from someone who wouldn't hold us to a strict payback schedule would be ideal. Thank goodness we didn't have to consider it, because we had a major argument about it.


Michelle Singletary: First, the relative should have said I'll give you the money for a USED car Or I'll give you the money to fix up the car you have.

But your instinct was right. Borrowing from family and friends is dangerous territory. Should you need help and I believe family should help give the money. And never loan money or borrow money the person needs back.


Atlanta, Ga.: My husband has not filed for at least 10 years. I know that we need to handle this, but I'm not sure where to begin. He is missing some of his W-2s from previous years which is another problem. How do we find a reputable person that can help us to get out of this situation?

Scott M. Estill: We can get all info from the IRS to make sure all income is reported properly and it is up to you to locate the expenses. Many tax professionals can help but an attorney here may be preferrable because of the possible criminal sanctions for non filing (unlikely to be prosecuted but certainly a possibility). If you cannot locate anyone in your area, call my office at 720-922-1120 as we help people all over the US get back into the tax system and eliminate the fear of the IRS. Scott


Atlanta, Ga.: I didn't file my taxes last year or this year yet. I always get money back, am I in trouble with the IRS? I do plan to file them before the summer is over.

Scott M. Estill: Probably not but I would recommend that you get 2005 and 2006 filed as soon as possible as the Government is holding your money and you should have this ASAP to do what you want with it. Scott


Anonymous: Dear Michelle,

Thank you so much for all of your columns, common sense advice and care. Today's column struck a nerve for me. I was driving myself crazy trying to figure out how to trade in my car and get a used minivan. The aha moment came when I looked at my credit score and the mountain of debt I'm already in. I already own a van. It's not a pretty one, but it's paid for. If I use it correctly in my sideline work, then I can work towards paying off my car. I can also use said proceeds to make my beater more reliable. It's like something I read regarding diets. It's sacrifice not deprivation. So, if you see me rolling around in the streets in a 1988 Blue and White Chevy van, honk one time. Just like weight, I din't gain my debt overnight. I've got to change my habits for a newer stronger me. And you, Ms. Singletary, armed with Big Momma's advice are a wonderful source of wisdom. From Pros and Cons, a Clear Choice (Today's Column)

Michelle Singletary: Ah shucks ain't you sweet!

It's stories like yours that I live for and help me endure the jabs.

Keep trucking or vanning (is that even a word). If I see you I will definitely honk.


San Francisco, Calif.: I have a $7,804 tax lien filed in Morris County, NJ. I paid 9,000 this week and owe another 5,000 (interest and penalties totalled 14,000). I did not qualify for an offer in compromise because of my income/debt ratio. Since the 9,000 covered more than the original amount owed, will the IRS issue a satisfaction of lien? I am trying to get mortgage approval before relocating to Washington, DC and purchasing my first home? This is required before I can get approved. I plan to pay off the balance, but it will exhaust my down payment/savings account. Can you offer any advice?

Scott M. Estill: The IRS will not release the lien until all amounts are satisfied (including interest) so it will still be there now. have you tried to borrow any $ from friends, family members or other sources to pay off the IRS so that your savings for your home will not be depleted? Scott


Oakland, Calif.: My husband and I owe $58K, due to bad advice and fees being assessed. We live paycheck to paycheck. The IRS wants $3600 per month, we don't have that kind of disposable cash, what can we do?

Scott M. Estill: I would consider an Offer in Compromise with the IRS. Go to and get Forms 433-A and 656- this will walk you through the process. Call my office if you have any questions on this as an Offer is often the best way to get out of this. In addition, Bankruptcy may be an option depending upon the type of taxes and how old they are. Best of luck, Scott


Charlottesville, Va.: What is the status of the alternative minimum tax for calendar year 2007, and will that affect any 'tax credits' for hybrid fuel new car purchases?

Thank you.

Scott M. Estill: Don't get me started on the AMT! It is one of the most confusing tax issues out there today and very unfair, especially to the middle class- any politician who claims to be supporting the middle class and tax relief should be challenged to back a repeal of the AMT. Nothing is being planned for 2007 as of now. The hybrid vehicle tax credit is not an AMT preference item so it will not hurt you with AMT. Scott

Michelle Singletary: I'm with Scott. The AMT is just crazy and snaring so many middle-income folks. This was supposed to make sure the rich pay something but is ending up hurting the not so rich.


Richmond, Va.: I just purchased my first house in February. How can I figure out if I am withholding too little from my paychecks. I could use the extra cash now and don't want a huge refund. Thanks, Lauren

Scott M. Estill: I would review your total Schedule A or standard deduction for 2006 and see what difference your estimated mortgage interest and real estate taxes would make. Once you have this info, then you can go to your employer to change your W-4- for instance, if you claimed married and 2 exemptions, claiming married and 3 will have less taxes withheld. Just make sure you don't go too far or you will owe next April! Scott


Washington, D.C.: Are you glad that Everson quit? Will people's 5th Amendment rights be respected more now that he is gone?

Scott M. Estill: I personally do not think it will make any difference but I could be wrong- Mr. Everson was an "enforcement first" type of Commissioner and I haven't seen anything from Washington DC now that lets me to believe that anything significant will be changing. Scott


Milwaukee, Wis.: I am a professional tax preparer who assists people receiving IRS audit letters. There are many more of them than the public realizes! I strongly recommend that taxpayers know the basis of their security sales before doing their tax return. The IRS will assume a zero basis if the taxpayer can't produce the true basis. That means that he will be assessed a tax liability on the entire sale, rather than just the profit.

Are you tempted to skip reporting stock sales because you don't know the basis? I can guarantee that you will be sent an IRS letter because the IRS receives copies of all securities sales.

Did you inherit stocks from Grampa? The basis of inherited securities is their value on the date of death. Keep a copy of the will and newspaper quotes of stock values as of that date.

Scott M. Estill: I agree- this is very common and keeping all records for cost basis on stocks, real estate, gold coins etc will save you a lot of $ and headaches when you sell these and need to report the sale on Schedule D. Scott


Harrisburg, Pa.: Please help, since I can't seem to get a straight answer from anyone. In January 2007, I rolled over my former Federal TSP into a traditional IRA (not allowed to roll over TSP into a Roth). Now in two years, assuming no changes in the law, what will be my tax liability when I roll over my Traditional IRA into a Roth (should be about $9000)?

Scott M. Estill: You will pay income taxes on this at whatever your tax bracket is- figure 10-35% depending upon income. Scott


Michelle Singletary: I tell you this hour goes by so fast. Thanks to all you sent in questions. Again, I'm sorry we ran out of time if we didn't get to your. But as usual I'll take some of the leftovers and print an answer in my column or in my e-letter.

Thanks again for joining me today.


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