California FTB Audit Defense | Tax Attorneys in Roseville, CA

What Is a California FTB Audit?

The California Franchise Tax Board (FTB) administers California's personal income tax and corporate income/franchise tax. The FTB conducts audits of both individuals and businesses to verify that California income tax returns are accurate and complete. FTB audits can be triggered by discrepancies between federal and California returns, residency issues, high income, business losses, or information received from the IRS or other sources.

Common FTB Audit Issues

• California residency and domicile — whether a taxpayer is a California resident subject to tax on worldwide income

• Part-year residency and income sourcing for individuals who moved into or out of California

• Nonresident income from California sources, including real property, business operations, and pass-through entities

• Conformity and non-conformity between federal and California tax treatment of income and deductions

• Business income apportionment — how income is allocated to California for multi-state businesses

• Deductions claimed on the California return that differ from federal returns

Residency Audits

California residency audits are among the most aggressive and fact-intensive FTB examinations. The FTB pursues high-income individuals who claim to have moved out of California to avoid the state's high income tax rates. Auditors examine bank and credit card records, cell phone data, social and professional contacts, real estate, vehicle registrations, voter registration, and travel records to determine where a taxpayer was actually domiciled.

Defending a residency audit requires a comprehensive, coordinated response supported by detailed documentation of the taxpayer's activities and connections outside California.

The FTB Protest and Appeals Process

When an FTB audit results in a proposed assessment, taxpayers have the right to file a written protest within 60 days. If the protest does not resolve the dispute, taxpayers may appeal to the California Office of Tax Appeals (OTA), an independent administrative tribunal that reviews FTB determinations de novo on the merits.