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Head of Household Taxpayers To Get Audit Letters

The Franchise Tax Board (FTB) is sending audit letters to 110,000 Californians to verify their use of the Head of Household tax filing status for 2002, according to the FTB.

Each year, the FTB reviews returns claiming this filing status because the rules for it are often misread. Many people who consider themselves the “head of their household,” but do not meet the law's requirements, use it by mistake. The advantage to using the Head of Household filing status is that it has lower tax rates and a higher standard deduction than the single filing status. It is intended to help unmarried people who provide a home for a qualifying person, typically their child.

Of the more than 14 million tax returns filed in California each year, nearly 2 million returns claim the Head of Household filing status. Last year, the FTB determined that more than 27,000 taxpayers did not qualify for it.

The FTB's Website at www.ftb.ca.gov provides information about this filing status. There is a self-test taxpayers can take to determine if they qualify.

The FTB assesses added taxes to those determined not to qualify by using either the single or married filing separate filing status. Taxpayers who do not respond to the letter may get penalties. Last year, this audit program resulted in $34 million in tax assessments.

Taxpayers who e-file their tax return can voluntarily complete a Head of Household questionnaire and include it with their e-filed return. Taxpayers who submit e-file questionnaires are less likely to be audited for this filing status.

Anyone who has questions about this filing status should request the FTB's Publication 1540, Tax Information for Head of Household. Taxpayers can get it by calling the FTB at (800) 338-0505 and entering code 934 or by visiting the FTB's Website.