You have no desire to to go to jail, nor do you want to pay penalties. But you don't want to pay any more tax than you have to; it's just not the American way. And acquaintances of yours are giving you a line about "your CPA probably doesn't know this, but" way to pay less taxes. So, how do you tell a legal tax dodge from an iffy or bad one?

The old adage "if it sounds too good to be true, it probably is" isn't bad advice, but isn't enough. Some sounding too good to be true are allowed because Congress uses the tax code as an artificial spending program. For example, if you invest in rental housing for low income folks, you can claim a special credit that isn't subject to the limitations imposed on losses from other passive activities. Other improbable sounding ploys work mainly because the courts have blessed some taxpayer friendly interpretation of a complicated code. If you do it right, you can cut your family's gift and estate taxes using family limited partnerships (FLPs) and grantor-retained annuity trusts.

For the majority of taxpayers the best shelters are still the mundane ones: homes, retirement accounts and stocks. Interest on $1 million in mortgage debt is deductible, and the first $500,000 in capital gains per couple from the sale of a primary home is tax free. For 2005 a worker can divert up to $14,000 ($18,000 for those 50 or older) into a tax-deferred 401(k). And the gift-tax exclusion, which is $11,000 a year to each of as many different relatives and friends that you want, still works.

But, if you want to get fancier, here are some pointers to help keep you safe.

1. Never agree to keep a tax dodge confidential. This is usually a marker of a questionable shelter and will limit your ability to run it by a disinterested lawyer or accountant. The tax code may seem incomprehensible to most people, but it's a public document; most legitimate strategies are well-known to tax pros.

2. Get an independent opinion. If you rely on a legal opinion provided by a firm that is affiliated with the adviser recommending a shelter, there is the possibility that you could get stuck paying penalties as well as back taxes and interest if it doesn't work. Getting a blessing from a professional can save you from penalties, if the professional is independent.

3. Never pay outsize fees or fees representing a percentage of taxes saved. Tax lawyers and CPAs are expensive, but they charge by the hour. Beware of promoters who guarantee a fee refund if you don't get the desired tax result. The IRS considers this a marker of a suspect shelter.

4. Never sign any misleading or backdated documents. Abusive shelters usually involve a series of transactions supposedly undertaken for nontax reasons. The taxpayer is asked to sign a letter claiming he made moves for business reasons, when those moves were orchestrated by a promoter.

5. Beware of charity related shelters. There are great tax-savvy ways to give to charity, such as contributing appreciated stock. But stay away of any scheme that suggests charitable contributions can be used for your own benefit (for example, you get reimbursed for volunteer work you perform during retirement) or involving claims for inflated deductions for noncash contributions. Promoters have moved into this area, and the IRS and Congress are responding to this with crackdowns.

6. Stay onshore. Avoid any scheme promising secrecy through offshore entities. You have to report foreign accounts worth over $10,000 to the IRS. If you fail to do so, you are committing a criminal offense and one the IRS, thanks to new information sharing agreements with other countries, may uncover.

7. Ignore any claims that "none of my clients has been audited for this." Even if true, it's irrelevant. Traditionally, the IRS has been slow in catching up with schemes, but it's speeding up. Should the IRS really approve of some new strategy, in most cases you can get a "private letter ruling" from it saying so for a fee.

8. Give extra scrutiny to any ploys combining different legitimate tax favored entities to produce outsized results that Congress didn't intend. Recent combination schemes the IRS has branded abusive couple S corporations with ESOPs and S corps with tax-exempt entities, such as public pension plans.

9. Never make deals with your own IRAs or retirement accounts. There are stiff penalties for such "prohibited transactions." For example, in one abusive scheme business owners sold their receivables for less than fair value to a shell company owned by their Roth IRAs, thereby pumping excess money into the tax-free Roths.

10. Make use of the Web. Fraud-busting sites, such as quatloos.com, will enable you to read up on the latest questionable schemes. At irs.gov you'll also find a rundown on "listed" shelters, high end strategies such as Son of Boss that the government says don't work, as well as information on the latest lower end scams, from "corporation soles" to silly constitutional arguments on why the income tax isn't legal. Keep in mind, however, that scam promoters have some pretty smart-looking Web pages, too.

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