FTB Starts Head of Household Audits
Released: August 2, 2007
The Franchise Tax Board (FTB) is sending more than 150,000 audit letters to individuals who filed their 2006 tax returns using the head of household filing status, according to the FTB.
“The Head of Household filing status can be of great benefit to unmarried people who provide a home for a qualifying person, generally a child, because it has lower tax rates and a higher standard deduction than the single filing status,” said Board of Equalization Chair and FTB Member Betty Yee. “However, the rules for this filing status are often misunderstood, resulting in many people considering themselves the 'head of their household' when they do not meet the tax law's requirements.”
Generally, to qualify for head of household filing status, taxpayers must meet all of the following tests:
- You were unmarried or considered unmarried as of the last day of the year.
- You paid more than half the costs of keeping up your home for the year.
- Your home was the main home for you and a qualifying person who lived with you for more than half the year.
- The qualifying person met the requirements to be a qualifying child or qualifying relative.
- You were not a nonresident alien at any time during the year.
The FTB strives to complete these audits soon after the returns are filed to notify taxpayers who may have incorrectly claimed the Head of Household filing status before they file next year's tax return. Taxpayers who e-file their tax return may want to complete a head of household questionnaire. Those who submit the questionnaires with their electronic return are less likely to be audited for this tax filing status.
Taxpayers who do not qualify for the head of household filing status will have their tax reassessed at either the single or married filing separate filing status. The FTB advises taxpayers who received an audit letter to respond promptly to avoid penalties. For the first time this year, taxpayers can respond to their audit letter on-line, by fax, or mail.
Of the 15 million tax returns filed in California each year, nearly 2 million California taxpayers take this beneficial filing status to reduce their taxes. Last year, the FTB determined that more than 30,000 taxpayers did not meet the requirements for this filing status resulting in $35 million in tax assessments.
To learn more about the Head of Household filing status, taxpayers can contact the FTB at www.ftb.ca.gov or (800) 338-0505 to request FTB's Publication 1540, which is available in both English and Spanish. The FTB's Head of Household Filing Status Page has more information including a self-test to help determine if you qualify for the head of household filing status.