Residency audits focus on the facts and circumstances of your move from one location to another to determine whether you have met the burden of establishing your intent to make the new location your permanent home. A large percentage of audits involve situations where a taxpayer maintains more than one permanent abode.
What does reside in California mean?
When you are in California for other than a temporary or transitory purpose, you are a California resident. Although you may have connections with another state, if your stay in California is for other than a temporary or transitory purpose, you are a California resident.
How does a California resident tax audit work?
A resident audit isn’t like a typical tax audit (see California Residency Audits: Three Year-End Tasks To Reduce Risk for Nonresidents for a discussion of the distinctions). If a large enough tax liability is at stake, to establish legal residency, FTB auditors may appear out of nowhere to interview neighbors.
Can a non-resident be audited for California residency?
Unfortunately for many nonresidents, “residency” is a legal term of art, one that may have nothing to do with a person’s honest belief that his or her real home lies outside California. As a result, the outcome of a residency audit often turns on seemingly trivial facts with no legal significance for a non-lawyer.
Can a FTB Audit lead to a California residency audit?
If the FTB finds significant taxable income coupled with meaningful contacts with California (such as a vacation home, business interests or long visits to the state), it can lead to the launch of a full-blown residency audit.
How is residency determined in the state of California?
California doesn’t follow bright-line rules to determine residency, but rather employs a “facts and circumstances” standard. That means FTB auditors can be somewhat impressionistic in their application of the law and downplay the main factors in favor of quirky logic, as our Texas client discovered.
