The Internal Revenue Service has updated both its Form 940, “Employer's Annual Federal Unemployment Tax Return,” as well as online tools to help taxpayers determine whether they should deduct their state and local general sales taxes, or whether they might owe the alternative minimum tax.The IRS has redesigned Form 940 to be more user-friendly for the more than 1 million payroll professionals and business owners who file the form.

In May 2004, a team led by the agency’s Office of Taxpayer Burden Reduction began the process of redesigning the form, working towards the creation of a plain-language form compatible with optical scanning. The new form also incorporates the advantages of the now-discontinued Form 940-EZ. Other improvements include:

  • A logical sequence, from the taxpayer’s point of view;
  • Eight separate parts with visual cues, breaking the task into smaller steps;
  • A new Schedule A for multi-state employers, or credit reduction situations; and,
  • Checkboxes, instead of “A, B, C” questions.

Separately, the agency also announced the introduction of a new tool to help individual taxpayers determine whether they might benefit by electing to deduct their state and local general sales taxes.To use the Sales Tax Calculator, taxpayers input their adjusted gross income, their number of exemptions and a zip code. The IRS estimates most taxpayers will get an answer in less than five minutes using the anonymous tool.
The calculator, accessible at http://apps.irs.gov/app/stdc/, is an alternative to the worksheet contained in Publication 600, “State and Local General Sales Tax.” The publication was posted online and mailed in early January to about 6 million individuals who received the Form 1040 tax package.

The updated AMT tool, accessible at http://apps.irs.gov/app/amt2006/, is an automated version of the worksheet contained in the Form 1040 Instruction Booklet, which allows taxpayers to see if they are subject to filling out “Form 6251, Alternative Minimum Tax.” The tool allows most taxpayers to enter the necessary data and get an answer in less than 10 minutes. AMT calculations are automatic when taxpayers e-file.

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