TurboTax generally gets good marks, along with other Intuit programs, but complaints have arisen about antipiracy software that comes bundled with the latest versions. It's called SafeCast, and clearly is intended to "manage digital rights" for more than just TurboTax -- in other words, for any software vendor that signs on, and for owners of music and movie copyrights. Intuit now lets you uninstall SafeCast as part of their own uninstall. Such software is called spyware and is increasingly common; it is very likely that if you have downloaded free software, you have spyware of some sort installed on your computer without your knowledge or consent. SafeCast, alas, is not apparently considered spyware, and may be kept out of spyware-detection and removal tools like Ad-Aware, as has happened at least once before under threat of lawsuit.

The Motley Fool rounds up the main
Tax Form Changes for 2002. The one that is going to affect the most taxpayers is the increase in the floor for filing a separate Schedule B, up to $1500 (from $400, which is just about the same amount of money in constant dollars). If your interest and dividends together are less, simply put the total directly on your 1040, remembering that the IRS still gets the 1099 forms and can calculate how much you earned. Of course, if you use TurboTax or another product, this will happen automagically.

Another change allows you to deduct college tuition, even if you don't itemize -- valuable for adult students paying their own way. Also, very low-income taxpayers will be encouraged to use retirement savings plans with a contribution credit, but the numbers affected will be few (most people making that little money will not choose to sock some away). And teachers will be happy to have a deduction for school-related materials they purchase on their own dime, without itemizing. But most will probably already itemize, so again the numbers affected will be few.

Humberto Cruz will get frequent notice in this blog. A former editor of the Orlando Sun-Sentinel, he is now a Tribune company columnist on financial matters, and his obsessive money-saving strategies apply to million-dollar real estate deals as much as they do to those scraping by.

Here Cruz describes how to "bunch" your charitable donations to save taxes, if you aren't able to itemize deductions every year. If it's close, it may be worth planning your deduction-related spending to fall in the tax year where you can get the most benefit. Other deductions to which this might reasonably apply are medical expenses and unreimbursed employee expenses, such as a home office. For example, you are able to deduct certain maintenance and repairs to your house pro-rated to the size of your home office. I will cover this in more detail later.

Sole proprietorships have more paperwork than wage-earners, but it really isn't that complicated when you get down to it.

Curiously, though, this BW q-and-a fails to mention the increasingly popular LLC, a hybrid of sole propietorships, S-corporations, and partnerships that to its proponents offers the best of each. It's certainly more flexible, especially if there is profit or loss (e.g. from capital depreciation) to distribute among more than one person. Nevertheless, it can potentially be a minefield, so I would recommend seeking initial advice from an attorney or accountant, even if in the end it all looks surprisingly easy. LLCs can manage with fewer tax forms than anything but sole proprietorship.

The House Always Wins. Online gambling is in a bit of a tither, since the major credit card vendors -- as well as Paypal -- have all agreed to stop processing transactions for internet gambling operations. An industry summit in Costa Rica is seeking a stay-in-business solution; unfortunately it may well resemble the increasing use of check-by-phone payments, which actually could give a gambling house access to your checking account. I shouldn't need to warn you about that. Still, this will likely give a needed boost to Paypal competitors, who aren't as picky.

Whether online or at the table, however, gambling has tax implications. Certain winnings -- generally big-ticket wins over $5,000 -- will have a withholding allowance sent to Uncle Sam. Others may not -- and the taxpayer is responsible for reporting that income.

On the other hand, it's little known that you can actually claim gambling losses as a deduction (as long as they do not exceed your winnings). If you do win a tell-grandma payout, it's a sure bet that you got there by a string of losses, and those losses may be used to offset the income from your winnings. Use form W2-G for both profit and loss accounting.

File online for free. It's no scam -- it's for real. The IRS is under Congressional mandate to increase the number of e-filers substantially. E-filing is faster for the consumer, especially if you're seeking a refund -- but it's even more advantageous for the IRS. Every tax return that is submitted on paper has a significant cost associated, from postal transport, to storage, to transcription, to error correction. E-filing reduces errors (at least to those introduced by the taxpayers themselves!), and cuts many other costs. Also, e-filers tend to file earlier in the season, meaning that the IRS manpower can be spread out more evenly, reducing the need for overtime and seasonal employees.

This win-win scenario, though, is mostly on the side of the IRS. To avoid a tragedy of the commons, they want more taxpayers to e-file, even if they don't get refunds. Which brings us to the problem at hand: the costs associated with having professional tax services or online vendors e-file your taxes. Low-wage workers just won't go for that, nor will those on fixed incomes. So the IRS hopes to draw them to the e-file table with a program to promote free tax preparation services. The USA Today story gets into the nuts and bolts, but the basics are that the IRS Free File Alliance program has several tax services signed up to provide a variety of different needs-based programs. (In the wake of lawsuits, some of the large vendors are more than eager to provide image-building pro bono filing, especially because it could provide a good referral business.) Criteria vary -- for instance, a low AGI, or active-duty military status, or under 20. But the IRS wants 60% of taxpayers to be eligible for some type of free service during each tax season.

Welcome to Tax Observer!

This will be a blog devoted to US Federal income taxes and associated topics, at a very accessible, how-to level. There will be reviews of tax books and software, news items, and knowledge gleaned from my ten years of experience doing complex personal returns including real estate, business, investment, and dependent situations. I do work for a tax service but I am not a certified accountant or career tax professional, just a regular person with hands-on experience that I hope is valuable. Note that in order to avoid professional conflicts I will use the Tax Observer pseudonym. This blog will not focus on tax politics, such as the ongoing debates over economic stimulus plans, and does not take a position favoring any proposal or party. But who doesn't like paying less taxes? If you read this blog, I hope I can show you a way or two to do that.