A new online tool has been added by the Internal Revenue Service (IRS) to assist individual taxpayers in determining if they would benefit if they elect to deduct their state and local general sales tax when filing their returns.
"The Sales Tax Calculator is another interactive tool the IRS.gov web site designed to help make it easier for taxpayers to figure their taxes," said Mark W. Everson, IRS Commissioner.
The taxpayers who itemize their deductions on Schedule A of the 1040 Form in 2006 will have the option of deducting the amount of state and local sales tax paid instead of deducting their state and local income taxes that were paid. Both the sales and income tax cannot be used as deductions by the taxpayer.
The new tax law that was enacted late in December reinstated the optional deduction for the state and local taxes and due to the late enactment date, the IRS had previously announced that the service would not begin to process returns claiming the sales tax deduction until February 3.
In order to use the Sales Tax Calculator, taxpayers enter their adjusted gross income, the number of exemptions and their zip codes. Most taxpayers should get an answer in less than five minutes using the new tool, the IRS estimates.
The taxpayers need not enter their names, social security numbers or any form of identification, as the calculator is anonymous and it is another of a series of aids the IRS has taken to ease the tax filing burden.
Taxpayers who do not wish to use the online calculator can use the worksheet in Publication 600, State and Local General Sales Tax, posted on the IRS.gov site and also mailed in early January to approximately six million individuals who received the Form 1040 tax package.
Taxpayers can use either the actual amounts paid to calculate what their sales tax deduction would be or use sales tax tables that allow them to factor in the exact sales taxes paid on certain specified items, such as a boat or a car or materials to build a home.
The tool can be found on the IRS web site by entering Sales Tax Calculator into the IRS.gov search box.