Anyone can arrange his affairs so that his taxes shall be as low as possible: He is not bound to choose that pattern which will best pay the Treasury.

Justice Learned Hand, Helering v. Gregory, 1934

They panicked Dec. 15, three years ago.

This typical middle-American couple faced a typical upper-middle-income problem: high taxes. They decided they deserved a break. But in two weeks, the tax year would end and it would be too late.

An accountant told them about a Nevada gold mine, an eleventh-hour investment that could "shelter" from federal taxes much of their $72,000 joint income. For every dollar down, he said, they could "write off" three. Although nearing retirement, the couple had little investment experience. But using savings that were earning only so-so interest to cut taxes made sense.

They handed over $10,000. It seemed too good to be true.

It was.

After two years and several thousand dollars of deductions, the Internal Revenue Service slapped that couple with more than $17,000 in back taxes, plus stiff interest and penalty charges. The couple lost their $10,000 investment when the gold mine produced plenty of complaints, but no gold. They lost their tax break when the IRS labeled the mining company an "abusive" tax shelter with no money-making value and nixed all deductions.

"The end-of-year tax panic makes most of us wonder 'What can I do at the last minute?' " acknowledges Robin Oegerle, president of Financial Strategies, a Washington investment analysis firm that caters to the smaller investor. The gold-mine couple, she says, did almost everything wrong.

Tax shelters, she says, are the traditional answer to the end-of-the-year panic. Until recent years, however, they've been the answer for only a small fraction of the taxpaying public: the wealthy. But since personal finances became America's preoccupation of the '80s, the popularity of sheltering income from taxes has trickled down to moderate-income Americans.

"Recent trends indicate that tax shelters are no longer peddled just to the wealthy by high-priced tax advisers and promoters," announced IRS Commissioner Roscoe L. Egger Jr. in September. "Middle- and lower-income taxpayers are going all-out for their cut of the shelter action."

And a lot of that action, especially during December investment flurries, isn't financially advisable, he says, particularly for the inexperienced investor.

According to Egger, the IRS analyzed 71 tax-shelter schemes recently that had been tagged as questionable. Twenty-five involved middle- and lower-income taxpayers. "These people don't make hundreds of thousands of dollars a year," says Egger. "They're our next-door neighbors who make $25,000."

Financial advisers warn that while legitimate shelters exist that can help the novice cut taxes -- even in mid-December -- the end of the year is never prime time to invest. Besides reducing good judgment, the late hour also creates an environment that breeds "quick-fix" shelters that earn investors more IRS scrutiny than tax savings.

"The worst thing a person can do is to say, 'Oh! I've got to pay Uncle Sam $15,000. I've got to find a tax shelter fast,' " says Peter McCarthy, senior vice president of tax advantaged investments at Johnston, Lemon and Co., a regional brokerage firm with offices throughout the area. "You don't want to be solving today's problems by creating tomorrow's problems."

The novice investor, Oegerle agrees, often can avoid trouble down the road by taking tax-shelter investment step-by-step. "Sometimes," she says, "tax shelters are like trying to run before you can walk."

Step One. Ask yourself, "Does it makes financial sense for me to invest in a tax shelter?"

"The higher up you go, the more favorably disposed you are to throwing off tax losses," says McCarthy. "People in the 42 percent tax bracket in 1984, taxable income of $41,500 to $55,300 on single returns and $60,000 to $85,600 on joint returns and up are getting hammered by taxes." They're the perfect candidates for shelters and probably qualify for the most alluring and risky deals.

Taxpayers in the 34-to-42 percent tax brackets ($28,800 to $41,500 on single returns and $35,200 to $60,000 on joint returns) aren't likely to meet legal requirements to invest in the chancy, big write-off schemes. But financial experts say they can choose from a variety of more conservative sheltering techniques.

When taxable income is less than $28,800 on a single return and $35,200 on a joint return, the taxpayer is in the 30-percent bracket or lower. If he wants to invest, experts advise he first should focus on the basics. Beyond that, all investors should first look to the economic gain, not the tax write-off.

"A guy came into my office the other day off the street with 10 grand and said, 'I wanna buy a tax shelter,' " says Leslie J. Silverstone, senior vice president and branch manager at Dean Witter Reynolds' 1776 K St. NW office.

"I said, 'How do you know you need a tax shelter?' He told me he had the money and he had high taxes. But he was oblivious to the alternatives."

Step Two. Most financial planners and brokers emphasize that some ordinary "Plain Jane" investments are prerequisites to buying into a tax shelter. And, despite their familiarity, some offer tax breaks the experienced investor never passes by.

"Shelter investments must be part of an overall financial plan," says Oegerle, which first should include most, if not all, of the following:

* An emergency reserve that is the equivalent of two months' income.

* Individual Retirement Account (IRA) or Keogh Plan investments. Both defer taxes on the investment and interest until retirement, when the tax rate should be lower. By making a $2,000 IRA investment now, for instance, someone in a 34 percent bracket can cut his tax bill immediately by $680.

* Participation in a 401K Program, named after the section on tax shelters in the IRS rulebook and offered by many corporations. Payroll deductions are invested in sheltered savings plans.

* Purchase of a house. "A lovely tax shelter," says Oegerle.

Step Three. Examine the specifics.

"You have to take a lot into consideration: the investor's age, projected income, safety of investment, liquidity," says McCarthy. "The investment and client need to match."

Among the questions consultants say you must consider: What is your financial condition today? How do you see it in five or 10 years? In 15 years? Do you have time constraints? If you're retiring next year or if the kids start college in two years, you don't want an investment in which you'll need to make payments for 10 years.

Brokers warn that you can't put a short fuse on investment performance, and most say that you should be prepared to tie your money up for a minimum of three to five years.

Temperament also is important.

"There are people who buy a stock and when it goes down a point they can't sleep," says Silverstone. "They should invest in something more stable. A guy says he wants to double his money. I say, 'I'll try, but there's a chance I'll lose all of it. What happens then?'

"He says he'll jump off a bridge. Well, I'm not going sell the guy that kind of investment."

Step Four. Be aware of the tax risk.

Since Congress has stiffened penalties against abusive shelters and their investors, this step, say financial advisers, is more critical this year than ever before. As part of its nationwide crackdown on shelters, the IRS requires registration of most.

Taxpayers who intend to claim deductions, tax credits, deferrals and exemptions from sheltered investments that are abusive are apt to be notified by the IRS not to bother -- before they have even filed a return.

"The red flags are pretty clear," says McCarthy. "If you invest in a tax shelter that doesn't make economic sense -- meaning its tax benefits outweigh its financial benefits -- you're going to get audited."

This week, IRS Commissioner Egger warned his agency would freeze "quickie refunds" claiming questionable tax shelters.

"Quickie refunds" usually are filed on form 1045 and allow taxpayers to apply leftover losses from this year's taxes to preceding years' taxes and receive a refund within 90 days. The technique, Egger said, often devastates the finances of middle- and lower-income investors whose shelters are disallowed following investigation and must repay the IRS the refund with interest and penalties. The IRS is investigating more than 333,000 tax shelters -- up from 400 a decade ago.

"What's your write-off -- the amount of deduction your investment will bring on your taxes?" asks Oegerle. "It's an immediate indication this year of your chances of being audited. If a shelter is risky, avoid it like the plague. A three-to-one write-off and higher will probably get audited. Two to one, not necessarily."

"Contrary to the advice some people are getting," IRS Commissioner Egger recently said, "this tax system isn't a grab bag of goodies. If you're going to taste forbidden fruit, be prepared to pay the price."

Despite the psychological warfare the IRS is conducting against abusive practices, financial planners, while more cautious, emphasize it's still smart finances to reduce taxes.

"You can write a check to Uncle Sam and kiss it goodbye," says McCarthy. "Or, you can write the same check to a quality broker, for instance, and make that money work for you.

"You get a tax benefit. And you might even make a profit down the road."