These tips may ease tax time

Linda Myers lives in Minnesota, but the story of her slot-machine experiences sounds similar to those of many Las Vegas gamblers -- with one twist. She's a pro.

She started playing $1 slot machines in 1992 after her husband died. She continued to run the family trucking business, but she became a serious gambler, spending 25 to 35 hours at a casino each week.

She considered herself a professional gambler by 2000 and developed strategies for winning, but no longer enjoyed the slots.

In 2003, she claimed that slot-machine gambling was a business occupation and sought federal income tax breaks for her business of playing slots.

The Internal Revenue Service balked, arguing that Myers owed $1,055 in penalties. The U.S. Tax Court, however, ruled in her favor in November.

The bad news for other slot players is that the tax-court decision does not set a precedent.

Thomas Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants, found the decision. But he doubts it would stand if appealed.

Some poker and blackjack players probably can make good arguments for being engaged in the gambling business, Ochsenschlager said. But slot machine players?

During a visit to Las Vegas this month, the tax expert offered some other tax preparation strategies that aren't so risky.

•Use your tax refund to contribute to a traditional individual retirement account for 2007.

Assuming the taxpayer does not earn too much to qualify for an IRA, he could claim a $4,000 IRA deduction for 2007. The taxpayer could use the 2007 year refund to make the IRA contribution, as long as he contributes the money to the IRA by April 15. If the taxpayer is 50 years of age or older, the maximum for 2007 is $5,000.

If the taxpayer is employed, his or her spouse also can contribute to an IRA.

•Consider funding a Roth IRA if you are in a low tax bracket and expect to be in a higher tax bracket later. Contributions to Roth IRAs cannot be deducted from taxable income, but they can be tapped tax-free later.

Ochsenschlager said a recent college graduate might benefit from a Roth. The recent graduate probably will pay a higher marginal tax rate by the time she retires, he said.

•If a Nevada taxpayer is going to be subject to the alternative minimum tax, recalculate taxes claiming state income taxes, rather than sales taxes. Either can be deducted from taxable income, but there is no state income tax in Nevada.

By not taking a zero deduction for state income taxes, the Nevada taxpayer might avoid paying the AMT. Avoiding AMT could reduce the tax bill even when the potential deduction for sales taxes is waived.

•Consider not claiming a child as a dependent if the child is attending college or another educational institution. The parent may make too much money for the child to qualify for a Hope Credit or Lifetime Learning Credit, but the child may qualify if he files a separate tax return and the parent does not claim the child as a dependent.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or (702) 383-0420.