The tax man cometh; are you ready?

Here are some useful year-end tax saving strategies for investors

'T is the season to start thinking about your taxable obligations. Sure, you think you pay enough in taxes to the government off the top of your earnings but the Internal Revenue Service thinks differently. You'll need intelligent tax deferments and smart, well thought-out deductions to keep Uncle Sam from reaming your investment "cash cache" for more than he actually deserves.

The key words here are intelligent and smart. Without the proper professional advice you could end up with a tax strategy that's as effective as a dog chasing its tail.

Cheryl Frank, a Washington-based CPA and tax attorney and author of the new book How to Survive an IRS Attack, notes that individual circumstances require individual strategies. For example, if you're in a higher tax bracket, say the 33 percentile, a tax-free investment ma yield only about 4%. If that constitutes a lower return because your tax rate has fallen to 15%, the year-end is the time that you might pare those securities from your portfolio.

"On the other hand, if you're in a lower tax bracket - around the 15 percentile - an investment yielding taxable holding, like a municipal security, could pay you 6% to 61/2%. By the time you pay taxes on that type of holding, you're still ahead of the game," says Frank.

It may not be in the best interest of high-income earners to hold large positions in investments that are taxfree. Frank explains, "You may need taxable assets to show at the end of the year as losses. This will reduce ultimate tax liability."

One of the most popular tax deferment vehicles are annuities offered by insurance companies. You can establish an annuity either through a lump sum payment or through an installment plan - your insurance agent can advise the best way for you. In return for your money, the insurance company guarantees that your investment principal will grow at a specific tax-free rate over a specified period of time. That rate can be fixed or floating, depending on the terms of the contract you sign.

So, what you have here is a vehicle that is part insurance and part investment. On the investment side, you could be earning a guaranteed tax-free return on your principal. Your earned income will not be taxed until you withdraw funds, and you probably won't do that for at least five years. The insurance aspect, of course, is the guaranteed regular income payments for as long as you live.

That payment is a building block for your retirement income. And with the proper beneficiary designation, it gives your heirs the right to collect the full amount of your original principal as well. Keeping complete records of all investment transactions is vital to preparing an accurate and beneficial tax return, says Frank.

"It's all part of the education, or miseducation, of the public. The IRS is not going to accept deductions or claims without documented proof," she says.

Every year, taxpayers grumble about the advice they get from calling the IRS's toll-free help line. You can avoid such frustration by calling 800-829-3676 and requesting the IRS Guide to Free Publications. The guide lists publications that address specific tax concerns such as pension and annuity income, tax information for divorced or separated individuals, and investment income and expenses: Another useful guide is Your Federal Income Tax, which explains exactly what type of information you need to have on hand to complete specific forms. It also highlights subtle year-to-year changes in tax laws and forms.