CA Residency Audits are Surging: FTB Targets Remote Workers Who Claim They “Moved”

California’s Franchise Tax Board (“FTB”) has quietly increased its enforcement on residency audits, and the trend is hitting a growing number of taxpayers who believe they successfully “moved out of California.” With remote work on the rise, more individuals are claiming residency in Nevada, Texas, Arizona, Idaho, and Florida, yet still maintain meaningful ties to California. The FTB is using new data-matching tools to challenge these filings and taxpayers are being caught off guard.

At Wilson Tax Law Group, APLC, we are seeing a pattern emerge: taxpayers who genuinely believed they left California are now receiving residency audit letters questioning where they actually live, earn income, and maintain their economic interests.

Why California is Targeting “Ex-Californians”

California has one of the highest state income tax rates in the nation, and departures from the state are at record highs. The FTB is now reviewing returns for signs that a taxpayer is claiming out-of-state residency while still owning property here, works remotely for a California employer, maintains a CA LLC or S-Corp, uses a California mailing address, and frequently travels to California for work or family needs.

The FTB analyzes credit card activity, cellphone records, online banking logins, EZ-Pass and flight data, all to build a timeline of where you actually spend time. Even short or frequent trips to California can lead the state to classify you as a statutory or domiciliary resident. Read more about part-time resident and nonresident status on the FTB’s website.

Common Red Flags

Based on our case experience, the FTB is aggressively scrutinizing those taxpayers who retain a California home (even if smaller than their main home), children or spouse remaining in California, using California doctors, accountants or business vendors, California based vehicle registration or insurance, and continuing to manage a California business entity. Taxpayers are surprised by how simple actions such as, keeping a California gym membership, could be used to argue continuing residency.

How we can help

Residency audits are highly fact-specific. At Wilson Tax Law Group, APLC, we can assist taxpayers by preparing evidence packages that demonstrate true domicile change, defend against improper FTB conclusions, negotiate audit scope and limit document requests, and handle appeals and resolve complex multi-state tax exposure. For taxpayers planning a move or currently under FTB examination, getting ahead of the issue is critical. Our firm helps clients structure their affairs correctly and defend their rights if challenged.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.