Franchise tax board
Download
1 / 65

Franchise Tax Board - PowerPoint PPT Presentation


  • 145 Views
  • Uploaded on

Franchise Tax Board. Head of Household. FSSAS Linda Watts | Ruth Wagner. Head of Household. Franchise Tax Board. Agenda. Registered Domestic Partners . Head of Household ( HOH) Program Overview. Requirements Discussion. Case Studies.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Franchise Tax Board' - amma


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Franchise tax board

Franchise Tax Board

Head of Household

FSSAS

Linda Watts | Ruth Wagner


Franchise tax board

Head of Household

Franchise Tax Board


Agenda
Agenda

  • Registered Domestic Partners

  • Head of Household (HOH)Program Overview

  • Requirements Discussion

  • Case Studies


Franchise tax board

|Starting 01.01.07|Registered Domestic Partners (RDPs)

  • California now treats a registered domestic partner (RDP) the same as a married person.

  • RDPs are generally required to file a joint or separate return the same as a married person.

  • Any reference tospousein this presentation also pertains to an RDP.


Franchise tax board

Head of Household (HOH) Program Overview

  • Audit Process

  • Legal Issues

  • General Rules

  • Denial Reasons


Process
Process

  • Electronic Filer

  • 1st Audit Letter

  • 2nd Audit Letter

  • 3 Ways for Taxpayers to Respond

    • Mail

    • Fax

    • Web


Process continued
Process |continued|

  • Notice of Proposed Assessment (NPA)

    • Audit letter included with no response to NPA

  • Acceptance letter


Franchise tax board

Requirements

Discussion


General rules all must apply
General Rules |ALL must apply|

  • Taxpayer must be either unmarried and not an RDPor meet the requirements to be considered unmarried or considered not in a registered domestic partnershipon the last day of the year.

2. Taxpayer must not be a nonresident alien at any time during the year.


General rules all must apply continued
General Rules |ALL must apply | continued|

  • Taxpayer paid more than half the cost of keeping a home for the year.

4. Taxpayer’s home is the main home for themselves and a qualifying person who lived with them for more than half the year. (Note: A taxpayer’s parent/stepparent is the exception.)


General rules all must apply continued1
General Rules |ALL must apply | continued|

  • The qualifying person is the taxpayer’s qualifying childorqualifying relative.

6. The taxpayer must be entitled to a Dependent Exemption Credit for the qualifying child or qualifying relative.


Who is a qualifying person
Who is a Qualifying Person?

Qualifying Child

  • Relationship Test

  • Age Test

  • Support Test

  • Special Test

  • Time In the Home (Residency) Test


Who is a qualifying person continued
Who is a Qualifying Person? |continued|

Qualifying Relative

  • Relationship Test

  • Gross Income Test

  • Support Test

  • Not a Qualifying Child Test


Who is unmarried and not an rdp
Who is Unmarried and not an RDP?

  • Never married and never an RDP.

  • Marriage or registered domestic partnership annulled and never remarried or entered into another registered domestic partnership.

  • Taxpayer’s spouse/RDP died in a prior year and taxpayer never remarried or entered into a registered domestic partnership.

  • Final decree of divorce or legal separation and not remarried or entered into a registered domestic partnership.

  • Spouse/RDP is a nonresident alien.


Who is considered unmarried or considered not in a registered domestic partnership
Who isConsidered Unmarried or Considered Not in a Registered Domestic Partnership?

  • The qualifying person is taxpayer’s birth child, stepchild, adopted child, or eligible foster child.

2. Taxpayer filed a tax return separate from their spouse’s/RDP’s tax return.

3. Taxpayer paid more than half the cost of keeping up their home for the year.


Who is considered unmarried or considered not in a registered domestic partnership continued
Who is Considered Unmarried or Considered Not in a Registered Domestic Partnership? |continued|

  • Taxpayer did not live with their spouse/RDP during any of the last six months of the tax year (July 1 – Dec 31).

5. Taxpayer’s home was the main home for taxpayer and their child for more than half the year.


Who is considered unmarried or considered not in a registered domestic partnership continued1
Who is Considered Unmarried or Considered Not in a Registered Domestic Partnership? |continued|

  • Taxpayer must be entitled to claim a Dependent Exemption Credit for their child.


Franchise tax board

Legal Issues

Counting Qualifying Time

Taxpayer Unmarried and not an RDP

If the taxpayer was married or an RDP at any time during the year, but was divorced, legally separated, or their registered domestic partnership was legally terminated by the last day of the year, they count the time with their child as follows:


Counting qualifying time continued
Counting Qualifying Time |continued|

  • Half of the days the taxpayer and the child lived in the taxpayer’s home with the spouse/RDP (ex-spouse/ex-RDP).

    and

  • All of the days the taxpayer and the child lived together in the taxpayer’s home without the spouse/RDP (ex-spouse/ex-RDP).

    (Appeal of William Tierney)


Counting qualifying time continued1
Counting Qualifying Time |continued|

Married Taxpayer

  • Taxpayers who are married or an RDP as of the last day of the tax year must also apply the Tierney rules.

  • If the spouse/RDP lives in the home at any time during the last six months, the taxpayer does not meet the requirements to be considered unmarried or considered not in a registered domestic partnership and cannot qualify for head of household filing status.

    (Appeal of Barbara Godek)


Franchise tax board

Example:

Husband, wife, and child lived together until 4/30 when the husband moved out.

The child continued living with his mother until 7/31 and then moved in with his father.

Their divorce was final on 8/31.


Franchise tax board

Example |continued|

January – April = 4 monthsEach parent is allowed 2 months

Ex-Wife has 3 additional months(May – July) 2 + 3 = 5 months total

Ex-Husband has 5 additional months(Aug – Dec) 2 + 5 = 7 months total


Franchise tax board

Eligible Foster Child

The child must be placed with the taxpayer by an authorized placement agency or by a judgment, decree, or other order of a court of competent jurisdiction. Generally, formal placement ends when the child reaches the age of 18.


Franchise tax board

Joint Custody

A taxpayer who shares joint physical custody of a child does not automatically qualify for head of household filing status. The taxpayer and the child must live together in the taxpayer’s home for more than half the year.


Joint custody head of household credit
Joint Custody Head of Household Credit

1. Taxpayer is unmarried and not an RDP on the last day of the tax year, or files using the married/RDP filing separately filing status, and lives apart from his or her spouse/RDP for the entire year.


Joint custody head of household credit continued
Joint Custody Head of Household Credit |continued|

  • Pays more than half the costs of maintaining his or her home as the main home for a birth child, step child, adopted child, or grandchild.

  • Maintains their home as child’s main home for at least 146 days, but not more than 219 days.


Joint custody head of household credit continued1
Joint Custody Head of Household Credit |continued|

  • One of the following documents defines the taxpayer’s home as the child’s main home for the above period:

  • Decree of dissolution of marriage or registered domestic partnership.

  • Decree of legal separation.

  • Written agreement entered into after the proceedings for divorce, dissolution of registered domestic partnership, or legal separation began, but before the final decree was issued.


Multiple families occupying the same dwelling
Multiple Families Occupying the Same Dwelling

If two or more families occupy the same dwelling, each family may be treated as keeping up a separate household if both of the following requirements are met:

  • Each family maintains separate finances.

  • Neither family contributes to the support of the other family.


Spouses rdps with separate sleeping quarters
Spouses/RDPs with Separate Sleeping Quarters

Spouses/RDPs who have separate sleeping quarters

in the same dwelling are:

  • Considered members of the same household.

  • Not considered unmarried or considered not in a registered domestic partnership for purposes of filing as head of household.


Common denial reasons
Common Denial Reasons

  • Qualifying person did not meet the gross income test.

2. Taxpayer was married or an RDP and lived with spouse/RDP at some time during the last six months of the year.

3. Qualifying person did not live with taxpayer more than half the year.


Common denial reasons continued
Common Denial Reasons |continued|

  • Taxpayer was legally married or an RDP and claiming a parent or relative other than a child as a qualifying person.

5. Taxpayer claimed a nonrelative as a qualifying person.


Franchise tax board

Case Studies

Head of Household


Case study u no 1
Case Study u No. 1

  • The taxpayer is still legally married as of the last day of the year.

  • The taxpayer lived with his spouse from January 1 to November 12.

  • The taxpayer’s teenage daughter lived with him all year.


Case study u no 1 continued
Case Study u No. 1 |continued|

Analysis

To qualify for head of household filing status, the taxpayer must be either unmarried and not an RDP or meet the requirements to be considered unmarried or considered not in a registered domestic partnership on the last day of the year.


Case study u no 1 continued1
Case Study u No. 1 |continued|

To be considered unmarried or considered not in a registered

domestic partnership, all of the following must apply:

  • Taxpayer’s qualifying person is their birth child, stepchild, adopted child, or eligible foster child.

  • The taxpayer’s tax return was filed separately from his spouse’s /RDP’s return.


Case study u no 1 continued2
Case Study u No. 1 |continued|

  • The taxpayer paid more than half the cost of keeping up his home for the year.

  • The taxpayer’s spouse/RDP did not live in the home at any time during the last six months of the taxable year.


Case study u no 1 continued3
Case Study u No. 1 |continued|

  • For more than half of the year, the taxpayer’s home was the main home for their birth child, stepchild, adopted child, or eligible foster child.

  • The taxpayer was entitled to claim a Dependent Exemption Credit for the child.


Case study u no 1 continued4
Case Study u No. 1 |continued|

The Determination

This taxpayer does not qualify for the head of household filing status.

  • Taxpayer cannot be considered unmarried. He was legally married and lived with his spouse from July 1 to November 12 which is a portion of the last six months of the year.


Case study u no 2
Case Study u No. 2

  • The taxpayer is divorced as of December 31 and did not live with her spouse during the tax year.

  • The taxpayer’s 8-year-old daughter lived with her for five months during the year. The daughter lived with the other parent the rest of the year.


Case study u no 2 continued
Case Study u No. 2 |continued|

Analysis

Taxpayer’s home must be themain homefor themselves and a qualifying person who lived with them formore than half the year.


Case study u no 2 continued1
Case Study u No. 2 |continued|

The Determination

The taxpayer does not qualify for the head of household filing status.

More than half the year is 183 days; in a leap year it is 184 days. (5 months is < 183 days)


Case study u no 3
Case Study u No. 3

  • The taxpayer was legally married, but did not live with his spouse during the tax year.

  • The taxpayer’s 12-year-old brother lived with him from January 1 to September 1.


Case study u no 3 continued
Case Study u No. 3 |continued|

Analysis

Taxpayer is legally married at the end of the year.

To use the head of household filing status, the taxpayer must be considered unmarried.


Case study u no 3 continued1
Case Study u No. 3 |continued|

The Determination

The taxpayer does not qualify to file using the head of household filing status because a brother is not a qualifying person for a taxpayer who is considered unmarried or considered not in a registered domestic partnership.


Case study u no 4
Case Study u No. 4

  • The taxpayer is unmarried and not an RDP.

  • The taxpayer paid all of the costs of maintaining his home where his cousin lived with him all year.

  • The cousin was 17 years old and had $2,500 in wages from a part-time job.


Case study u no 4 continued
Case Study u No. 4 |continued|

Analysis

Taxpayer’s cousin is not one of the relatives who, by law, can qualify a taxpayer for head of household filing status.


Case study u no 4 continued1
Case Study u No. 4 |continued|

The Determination

The taxpayer does not qualify to file using the head of household filing status. Taxpayer does not have either a qualifying child or a qualifying relative.


Case study u no 5
Case Study u No. 5

  • The taxpayer was divorced 15 years ago.

  • Her 32-year-old son, who was unmarried and not an RDP, lived with her the entire year and had gross income of $2,000.

  • The taxpayer provided more than half of her son’s support and paid all of the costs of keeping up the home.


Case study u no 5 continued
Case Study u No. 5 |continued|

Analysis

  • Taxpayer was unmarried and not an RDP (divorced).

  • Taxpayer paid more than half the cost of keeping up her home.

  • Her son did not meet the age test to be a qualifying child, but he met the requirements to be a qualifying relative.

  • Her home was the main home for her and her qualifying relative for more than half the year.

  • Taxpayer was entitled to the dependent exemption credit for her qualifying person.


Case study u no 5 continued1
Case Study u No. 5 |continued|

The four qualifications to be a qualifying relative are:

  • Relationship Test

  • Gross Income Test

  • Support Test

  • Not a Qualifying Child Test


Case study u no 5 continued2
Case Study u No. 5 |continued|

The Determination

Taxpayer qualifies because she met all of the tests.


Case study u no 6
Case Study u No. 6

  • The taxpayer was married and lived with her spouse and her 17-year-old daughter until September 26. The taxpayer’s divorce was final on November 16. The taxpayer did not remarry or enter into a registered domestic partnership.

  • The taxpayer paid all of the costs of keeping up the home for herself and her daughter, who lived with her from January 1 to December 15. The daughter had no income.


Case study u no 6 continued
Case Study u No. 6 |continued|

Although the taxpayer lived with her spouse during

the last six months of the year:

  • She was unmarried and not an RDP as of December 31.

  • She paid more than half the cost of keeping up her home.

  • Her home was the main home for her qualifying child for more than half the year.


Case study u no 6 continued1
Case Study u No. 6 |continued|

To determine how many days the taxpayer’s home was the main home of the child, follow the guidelines below:

  • Count half the days when the taxpayer and the child lived together in the taxpayer’s home while the taxpayer’s ex-spouse/ex-RDP was also living there.

  • January 1 to September 26 is 269 days. Divide 269 by 2, the result is 134.5 days allowed for each parent.


Case study u no 6 continued2
Case Study u No. 6 |continued|

3. Then add all the days the taxpayer and the qualifying child lived together in the taxpayer’s home without the taxpayer’s spouse/RDP (ex-spouse/ex-RDP):

  • September 27 to December 15 is 80 days.

  • The taxpayer’s child lived with the taxpayer for 214.5 days (134.5 + 80).


Case study u no 6 continued3
Case Study u No. 6 |continued|

The Determination

Taxpayer qualifies for head of household filing status because using the Tierney rule, her qualifying person lived with her for more than half the year


Case study u no 7
Case Study u No. 7

  • The taxpayer is unmarried and not an RDP.

  • The taxpayer claimed his girlfriend’s 12-year-old son as his qualifying person.

  • His girlfriend and her son lived with the taxpayer for the entire year.

  • The taxpayer paid all of the costs of keeping up the home.

  • The son had no income.


Case study u no 7 continued
Case Study u No. 7 |continued|

Analysis

The girlfriend’s son is not one of the relatives who, by law, can qualify a taxpayer for head of household filing status.

He is not the taxpayer’s birth child, adopted child, stepchild, or eligible foster child.


Case study u no 7 continued1
Case Study u No. 7 |continued|

The Determination

  • The taxpayer does not qualify for the head of household filing status. He may be entitled to a Dependent Exemption Credit for his girlfriend and her child if all of the Dependent Exemption Credit tests are met.

  • See FTB Publication 1540, definition for Dependent Exemption Credit for requirements to claim the credit.


Case study u no 8
Case Study u No. 8

  • The taxpayer was married as of the last day of the year, but did not live with her spouse during the tax year.

  • The taxpayer’s 22-year-old son lived with the taxpayer the entire year, was not a student, and had gross income of $8,500.

  • The taxpayer paid all of the costs of maintaining her home.


Case study u no 8 continued
Case Study u No. 8 |continued|

Analysis

A qualifying child must be under 19 years of age, or under 24 years of age if a full-time student, to meet the age test.

A qualifying relativecannot earn more than the federal dependent exemption amount for the year in question.


Case study u no 8 continued1
Case Study u No. 8 |continued|

The Determination

The taxpayer does not qualify for the head of household filing status because her son does not meet the requirements to be either a qualifying child or aqualifying relative.


Contacts
Contacts

Head of Household Information

Practitioners Hotline 916.845.7057

Taxpayer Service Center 800.852.5711


Contacts1
Contacts

Franchise Tax Board Head of HouseholdAudit Program Contacts

Rick Mitchell |Section Manager| 916.845.3421

Alex Davoodi |Unit Manager| 916.845.6728

Ruth Wagner |Audit Group Manager| 916.845.5378