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TAX TIPS
Schedule D ... as in Dangerous
by Kevin McCormally

Today I want to warn investors about a little land mine hiding in the new tax forms -- the revised Schedule D.

This form for reporting capital gains is more mind-boggling than ever because Congress changed the rules in the middle of 2003 -– on May 6 to be exact. For most investments sold before that date, long-term profits are taxed at 20%, or 10% for taxpayers in the 10% or 15% brackets. Long-term gains from sales on or after May 6 enjoy the new rates of 15%, or 5% for lower bracket investors.

For simplicity's sake, the IRS urged Congress to make the change retroactive to cover all of 2003. But the lawmakers didn't listen. Now, in addition to the two-page form, some taxpayers have to use the mother of all worksheets: a 51-liner that applies different tax rates to different kinds of gain.

It's no surprise that the IRS is expecting a lot of mistakes. One way to protect yourself is to use tax preparation software that has all the new rules built in. Letting your computer do the mathematical gymnastics will let you sidestep costly errors and pencil-biting frustrations.

As usual, our favorite program is TaxCut from H&R Block. Not only is it less expensive than its rival -– TurboTax -– but also it is the only program that includes money-saving tips from Kiplinger.

If you like the easy-to-understand tax help you find in Kiplinger's magazine and at Kiplinger.com, you'll love the help that's packed into TaxCut.