While the memory of filing tax returns seems all too fresh in our minds, the Internal Revenue Service has already begun to prepare for the upcoming tax filing season. The IRS has again selected CCH to provide the sales tax data for use by all taxpayers who file a 1040 tax return. This marks the third consecutive year that CCH has been chosen by the IRS as its selected provider of sales tax information. CCH, a Wolters Kluwer business, is a leading provider of tax information, software and services (www.CCHGroup.com).
The information for the IRS tables, which taxpayers use to determine their optional sales tax deduction on their tax return, is derived from numerous CCH workflow tools, including CCH’s ZIPSales(r) Database and ZIPSales(r) Database with Taxability, as well as customized research using the CCH(r) Tax Research NetWork™.
“Our leadership in providing comprehensive tax law information on both the federal and state level enables us to extend our long and trusted relationship with the IRS,” said CCH President Mike Sabbatis. “Providing this multi-jurisdictional sales tax information strengthens our relationship with the IRS and provides us with an opportunity to directly support millions of taxpayers, as well as the tax professionals they rely on, in making informed decisions based on the authoritative information that we produce.”
The IRS provides taxpayers with the sales tax tables to help comply with the American Jobs Creation Act of 2004, which allowed individuals to choose to deduct their state and local sales tax rather than their state and local income tax on their federal tax return. Using the IRS tables, taxpayers can determine whether to deduct their state and local sales tax versus their state and local income tax without having the burden of saving all their receipts to tally the sales tax they actually paid. For the 2004 tax year, the first year that the deduction was allowed, about 11 million individuals claimed the general sales tax deduction.
Relationship Taps Several Key CCH Products
To furnish the IRS with comprehensive sales tax information, CCH provided the IRS with sales tax detail for all U.S. ZIP Codes using CCH’s ZIPSales Database. The IRS also relies on CCH data relating to the taxability rules for more than 500 Bureau of Labor Statistics spending categories.
Additionally, CCH tools used to collect sales tax information for the IRS tables include ZIPSales Database with Taxability, which includes a taxability matrix to determine if specific products are subject to sales or use tax in each taxing jurisdiction, and the CCH Tax Research NetWork, the industry’s most advanced tax research network.
With this taxability and tax rate information for the various state and local jurisdictions, the IRS is then able to determine the average amount of sales tax paid in each jurisdiction as a function of both income and family size. These averages appear in the IRS tables as a convenience for taxpayers who prefer not to rely on receipts to determine how much sales tax they pay.