TRACY, Calif.--Feb. 22, 2005--Petz Enterprises, Inc. (PEI), producers of the popular TaxBrain® Online Tax Service and CrossLink Professional tax software has determined that the new standardized deduction allowance for state and local sales taxes may have been "low-balled" by the IRS to understate actual sales tax outlays.

On Friday December 17, the IRS released the tables taxpayers will use to calculate their new deduction for state sales tax payments for the upcoming tax season. It now appears that the IRS has opted for a regressive formula that assumes that as household income increases, the percent of income spent on taxable purchases declines.

Further, in a Monday morning response to questions about the method used to calculate the estimates, the IRS has stated that there is no clear-cut formula for figuring the sales tax amounts.

According to Charles W. Petz, CPA and Vice President of Tax Development, "With the October passage of the latest Bush tax bill, taxpayers now have the option to deduct state and local sales taxes on their 2004 tax returns. Prior to this change only state and local income taxes were deductible. Taxpayers in states that did not levy an income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming) were not allowed to deduct the taxes they paid to fund their state governments.

While the change provides some level of equity for taxpayers in the nine states that don't have an income tax, the method used by the IRS to implement the law will short-change many that would have benefited."

Mr. Petz added, "Because most taxpayers don't keep records about the sales taxes they pay, and to provide an indisputable 'safe harbor,' the IRS has published a table of sales tax allowances. The table suggests an indisputable IRS estimate of the amount of sales taxes paid by a household based upon: 1) state of residence; 2) income; and, 3) number of exemptions. A worksheet is also provided to make adjustments to the base estimate for purchases of vehicles, homes, and home building materials."

Senior Tax Analyst Eric Hayes explained, "In our initial analysis, it appears that the IRS has low-balled the estimates and used a regressive formula for making their estimates. It is difficult to apply a nation-wide formula for choosing to deduct state/local sales tax vs. state/local income tax because of the patchwork tax situation on a state-by-state basis. In many cases, families attempting to deduct sales taxes will wind up paying too much federal tax."

About TaxBrain® Online Tax Service

TaxBrain is a full service online tax service providing tax preparation, tools, and resources all year to help taxpayers manage their tax burden with greater confidence and ease. Launched in 2000, TaxBrain Online accommodates the schedule and needs of the busy American lifestyle. In 2002, TaxBrain Online emerged as one of the most popular services for online tax preparation and filing available on the web. For more information, visit www.taxbrain.com.

About Petz Enterprises, Inc.

Petz Enterprises, Inc. (a closely-held California corporation) is a software development company and a leading provider of tax preparation and filing solutions for the professional and consumer markets, helping to automate and simplify federal, state and local tax compliance. PEI's Crosslink® line of professional tax software products enable tax practitioners and service bureaus to accurately prepare and file large volumes of individual tax returns. Founded in 1974, Tracy, CA-based PEI is dedicated to serving the needs of the professional tax community and individual taxpayers worldwide. For more information, visit http://www.petzent.com.