If you've filed as a California nonresident or part-year resident, particularly after a year when you had significant income, you may receive a residency questionnaire from the Franchise Tax Board. This is typically the opening move in what could become a full residency audit. Understanding what FTB is looking for, and how to respond appropriately, can significantly affect the outcome.
Important: Consider seeking professional guidance before responding to an FTB residency questionnaire. A well-prepared response ensures that you provide what's required while protecting your privacy rights and keeping the audit appropriately focused on the relevant issues.
The Initial Document Requests
FTB's initial questionnaire typically requests financial account documentation as a starting point. This generally includes monthly bank statements, canceled checks, and credit card statements for the period under examination.
For each financial account, FTB will ask you to provide the account number, the branch location (if applicable), all authorized signatories and users on the account, the type of account, and the dates each account was opened and closed (if applicable during the audit period).
Why does FTB want this information? Financial records reveal patterns. Where were your checks written? Where did your credit card transactions originate? Which bank branches did you visit in person? These records paint a picture of where you actually spent your time, which is central to the residency determination.
What Comes Next
The initial questionnaire is rarely the end of FTB's inquiry. Based on your responses, auditors will typically request additional documentation. Common follow-up requests include telephone records showing call origination points, calendar and appointment records, medical and dental records showing where you received care, vehicle registration and maintenance records, employment records, travel documentation, and records of memberships in clubs, religious organizations, and professional associations.
FTB may also request sworn statements or declarations, ask you to complete detailed questionnaires about your daily activities during specific periods, or request information about family members' locations and activities.
Protecting Your Privacy Rights
In our experience, FTB auditors commonly request information beyond what is strictly necessary or relevant to the residency determination. Taxpayers have legitimate privacy interests, and responding to an audit doesn't mean waiving those interests entirely. The challenge is distinguishing between requests that are appropriate and those that exceed the proper scope of the inquiry.
This is where professional representation provides significant value. We understand what information FTB is entitled to, what is genuinely relevant to the residency determination, and where requests may be overly broad. Our goal is to ensure you meet your obligations while maintaining appropriate boundaries—keeping the audit focused on the issues that actually matter to the residency question.
Timeline and Process
FTB residency audits typically take 12 to 24 months to complete, though complex cases can extend longer. The process generally follows this pattern: initial questionnaire, document production, follow-up requests, auditor analysis, position letter from FTB stating their preliminary determination, taxpayer response, and final determination.
If FTB determines you were a California resident during the period at issue, they will issue a Notice of Proposed Assessment reflecting the additional tax, interest, and potentially penalties. You then have the right to protest the assessment and, if necessary, appeal to the Office of Tax Appeals.
Common Mistakes Taxpayers Make
Responding too quickly without understanding the implications is perhaps the most common mistake. Taxpayers often want to "get it over with" and provide everything FTB asks for immediately. Taking time to prepare a thoughtful, organized response is usually the better approach. A hasty response may be incomplete, disorganized, or broader than necessary.
Another frequent mistake is providing narrative explanations that go beyond what was asked. Sticking to the specific questions posed, with clear and accurate answers, keeps the audit focused. Volunteering information or explanations that weren't requested can introduce new issues or create confusion about facts that were otherwise straightforward.
Finally, some taxpayers ignore the questionnaire entirely, hoping it will go away. It won't. FTB has substantial enforcement resources and will proceed with or without your cooperation. Ignoring an audit inquiry typically results in FTB making a determination based solely on the information available to them, which rarely reflects the complete picture.
How Professional Representation Helps
When you engage a representative for a residency audit, we handle all communication with FTB on your behalf. We review document requests to ensure responses are complete and appropriately scoped. We organize and present information in a way that clearly addresses the residency question. We identify issues in your fact pattern early so they can be addressed thoughtfully. And we understand FTB's processes and procedures from firsthand experience.
The goal is to ensure that the audit proceeds fairly, that your privacy rights are respected, and that the final determination is based on an accurate and complete understanding of the facts. FTB has significant resources devoted to residency enforcement. You deserve representation that understands how to navigate that process effectively on your behalf.