1. Linda Watts | Ruth Wagner
Franchise Tax Board
Head of Household
FSSAS
Linda Watts | Ruth Wagner

2. Head of Household
Franchise Tax Board
Introductions
<CLICK>
2007

3. Registered Domestic Partners Head of Household (HOH) Program Overview
Agenda
Registered Domestic Partners
Head of Household (HOH) Program Overview
Agenda - What the workshop entails:
<CLICK>
Registered Domestic Partners.
An overview of the HOH Program.
Discussing HOH requirements.
Discussing case studies.
Does everyone have copies of Publication 1540, California Head of Household Filing Status, and Publication 1585, HOH Workshop Supplement?
These publications include almost everything I will be covering today.
What we hope you get out of the presentation:
For you to understand the HOH audit process.
For you to understand HOH filing status requirements.
Requirements Discussion
Case Studies

4. |Starting 01.01.07| Registered Domestic Partners (RDPs)
California now treats a registered domestic partner (RDP) the same as a married person.
Registered Domestic Partners (RDPs)
<CLICK>
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 to spouse in this presentation also pertains to an RDP.
Mention RDP – Publication 1585 (supplement), page 1 or (2008) Publication 1540, RDP definition for details.
RDPs are generally required to file a joint or separate return the same as a married person.
Any reference to spouse in this presentation also pertains to an RDP.
2007

5. Head of Household (HOH) Program Overview
Audit Process
Legal Issues
The HOH overview will cover:
<CLICK>
The HOH audit process.
General rules for the HOH filing status.
Legal issues.
Most common denial reasons.
As I go through the presentation, the screen information basically follows the HOH Workshop Supplement, and we will be referring to Publication 1540 definitions throughout our discussion.
If you have a question during this presentation, please ask me while it’s fresh in your mind.
Let me explain a little bit about how we complete our HOH audit process.
General Rules
Denial Reasons
2007

6. Process Electronic Filer 1st Audit Letter 2nd Audit Letter
<CLICK>
Electronic filers are examined using the same criteria as paper filers. Most electronic filers never receive correspondence from us. We only contact electronic filers when the electronic audit questionnaires (FTB 4803e) they fill out contain incomplete or conflicting information, or their answers indicate that they do not qualify.
We begin sending paper HOH questionnaires months after the final filing date (July). We send the first of two audit letters and allow 30 days to respond. (About 300,000 are examined annually.)
If we do not get a response from the first audit letter, we follow-up with a second audit letter and provide 20 days to respond. (About 150,000 audit letters are issued.)
There are three different ways a person can provide us with head of household information. By mail, fax, and web response. When submitted electronically, no paper copy needs to be mailed.
3 Ways for Taxpayers to Respond
Mail
Fax
Web

7. (Next slide starts - General Rules)
Process |continued|
Notice of Proposed Assessment (NPA)
Audit letter included with no response to NPA
Acceptance letter
If we do not receive a response to the second audit letter, or if at any time during the process it is determined that the taxpayer does not qualify for HOH, a Notice of Proposed Assessment (NPA) is issued disallowing the HOH filing status. We allow the taxpayer 60 days to protest the NPA. (Of 300,000 returns examined, and 150,000 paper audit letters issued, we send about 50,000 denials annually, 60% of which are for failure to reply to the audit letters.)
If the Notice of Proposed Assessment is issued because the taxpayer did not reply to either audit letter, an audit letter is included with the NPA, providing a third opportunity to reply.
<CLICK>
If at any time during the audit process we determine that the taxpayer does qualify for HOH, we then issue an acceptance letter.
(Next slide starts - General Rules)

8. Requirements Discussion <CLICK> 2007
The requirements to use the head of household filing status include six General Rules. Let’s briefly cover these rules.
<CLICK>
2007

9. General Rules |ALL must apply|
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.
General Rules for using HOH filing status (all six rules must apply.)
<CLICK>
1. 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. We will define the highlighted terms shortly.
2. Taxpayer must not be a nonresident alien at any time during the tax year.
2. Taxpayer must not be a nonresident alien at any time during the year.

10. 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.)
3. Taxpayer paid more than half the cost of keeping up a home for the year.
<CLICK>
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. The parent does not need to live in the taxpayer’s home, but the taxpayer must pay more than half the cost of keeping up the home in which the parent lives.)

11. General Rules |ALL must apply | continued|
The qualifying person is the taxpayer’s qualifying child or qualifying relative.
6. The taxpayer must be entitled to a Dependent Exemption Credit for the qualifying child or qualifying relative.
5. The qualifying person is the taxpayer’s qualifying child or qualifying relative.
<CLICK>
The taxpayer must be entitled to a Dependent Exemption Credit for the qualifying child or qualifying relative.
Exception: A taxpayer who is unmarried and not an RDP does not need to be entitled to a Dependent Exemption Credit for a qualifying child who is also unmarried and not an RDP. See IRC Section 2(b)(1)(A)(i).
Now let’s discuss the highlighted terms for a minute.
(Next slide - Who is a QP?)

12. Who is a Qualifying Person?
Qualifying Child
Relationship Test
Age Test
Who is a Qualifying Person?
Internal Revenue Service (IRS) law defines a qualifying person as either a qualifying child or a qualifying relative.
Qualifying child: 5 tests (Publication 1585, page 4 or publication 1540, Qualifying Child
definition.)
1. Relationship Test – Remember considered unmarried or considered not in a registered domestic
partnership (only a child)? Never an unrelated person who is a member of the household, only the
listed relationships. <CLICK>
2. Age Test <CLICK>
3. Support Test <CLICK>
4. Special Test:
Illustrate special test: Publication 1585, page 6 and 7.
A mother and daughter live in the same home with the daughter’s child (mother’s grandchild). Both will file returns. Who can claim the child? If both file returns, the parent, not grandparent.
<CLICK>
5. Time in the Home (Residency )Test
Support Test
Special Test
Time In the Home (Residency) Test

13. Who is a Qualifying Person? |continued|
Qualifying Relative
Relationship Test
Gross Income Test
A Qualifying Relative: (4 tests)
<CLICK>
1. Relationship Test: Reminder if needed: not an unrelated member of the household (or unrelated person). See publication 1540 definition for qualifying relative.
2. Gross Income Test: 2006 – $3300;
2007 – $3400; $3,500.
3. Support Test: Refer to FTB 1540 definition for qualifying relative.
4. Not a Qualifying Child Test: Refer to FTB 1540 definition for qualifying child.
Note: A qualifying child or qualifying relative must also meet the Dependent Exemption Credit tests (reference Dependent Exemption Credit under HOH Legal Issues). However, a taxpayer who is unmarried and not an RDP does not need to be entitled to a Dependent Exemption Credit for a qualifying child who is also unmarried and not an RDP.
Questions?
(Next slide - Unmarried)
Support Test
Not a Qualifying Child Test

14. 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.
Who is unmarried and not an RDP? (See Publication 1540 Unmarried and not an RDP definition.)
Determine marital status first, then relative list for who can be a qualifying person:
<CLICK>
Taxpayer 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
Final decree of divorce or legal separation and not remarried or entered into a registered domestic
partnership.
Spouse/RDP is a nonresident alien.
(Next slide - Considered unmarried or considered not in 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.

15. Who is Considered 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.
Who is considered unmarried or considered not in a registered domestic partnership?:
A taxpayer who is legally married or an RDP and who meets the following six
requirements is considered unmarried or considered not in a registered domestic
partnership: (Reference Publication 1540, Considered Unmarried or Considered not in a
Registered Domestic Partnership Definition.)
<CLICK>
1. Taxpayer’s qualifying person is their birth child, stepchild, adopted child, or eligible foster child.
2. Taxpayer filed a tax return separate from their spouse/RDP.
3. Taxpayer paid more than half the cost of keeping up their home for the year.
3. Taxpayer paid more than half the cost of keeping up their home for the year.

16. 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).
<CLICK>
4. Taxpayer did not live with their spouse/RDP during the last six months of the tax year. (Inclusive of July 1 – December 31.)
5. Taxpayer’s home was the main home for taxpayer and their child for more than half the year.
5. Taxpayer’s home was the main home for taxpayer and their child for more than half the year.

17. (Next slide - Eligible Foster Child)
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.
<CLICK>
6. Taxpayer must be entitled to claim a Dependent Exemption Credit for their child. (The child meets requirements to be a qualifying child or qualifying relative and meets the joint return and citizenship tests.) See Publication 1540, Dependent Exemption Credit definition).
Any questions regarding the terms unmarried and not an RDP, considered unmarried or considered not in a registered domestic partnership?
(Next slide - Eligible Foster Child)

18. Counting Qualifying Time
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:
One of the legal issues that arises frequently is: How do parents count time when they share physical custody of a child?
Rulings, clarified by the Board of Equalization (state ruling, not federal), are for a taxpayer who is unmarried and not an RDP:
If the taxpayer was married or an RDP for part of the year but is divorced, legally separated, or their registered domestic partnership is legally terminated by the last day of the year, they can count the time with their child as follows:
<CLICK>

19. 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)
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). (More than 12 hrs.)
(Appeal of William Tierney)
(Next slide - Married TP)
<CLICK>

20. 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)
For taxpayers who are married or an RDP:
Taxpayers who are married or an RDP as of the last day of the tax year must also apply the same Tierney rules.
However, the spouse/RDP can only live with the taxpayer and child during the first six months of the year.
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)
Let’s look at an example.
<CLICK>

21. 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.
EXAMPLE: (Not in Pub 1585)
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 the father.
Their divorce was final on 8/31.
Let’s detail this some more.
<CLICK>

22. (Next slide - Joint Custody)
Example |continued|
January – April = 4 months Each parent is allowed 2 months
Ex-Wife has 3 additional months (May – July) = 5 months total
Counting Time with Qualifying Child:
When taxpayers lived together, from January – April = 4 months, each parent is allowed half, or 2 months, of this time.
<CLICK>
After the split in April, the wife has 3 additional months (May to July) = 5 months total (less than half of the year).
Husband has his 2 months plus additional 5 months (August to December) = 7 months total (more than half of the year).
Any questions on counting time?
(Next slide - Joint Custody)
Ex-Husband has 5 additional months (Aug – Dec) = 7 months total

23. (Next slide - Legal Issues)
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.
<CLICK>
Let’s clarify what is meant by an eligible foster child. (The 2004 federal Working Families Tax Relief Act defined this term.)
The child must be placed with the taxpayer by an authorized 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.
Pre-2005 law required the foster child to live in the home all year. Post-2005 law above only requires the eligible foster child to live in the taxpayer’s home for more than half of the year, the same as all other qualifying persons.
(Next slide - Legal Issues)

24. (Next slide - Joint Custody Credit)
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.
Common Legal Issues:
Joint Custody: (Publication 1540, reference joint custody definition)
Parents share custody of the child.
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.
(Next slide - Joint Custody Credit)
<CLICK>

25. 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.
Common Legal Issues:
If a child lives with both parents under a joint custody agreement, only the custodial parent can qualify for HOH filing status. However, the noncustodial parent may be entitled to claim the Joint Custody Head of Household Credit. The noncustodial parent may claim the Joint Custody Head of Household Credit if he or she:
<CLICK>
1. 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 lived apart from his or her spouse/RDP for the entire year.

26. 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.
2. 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. (Different definition for qualifying child.)
<CLICK>
3. Lives with the child for at least 146 days, but not more than 219 days of the tax year.
Note: In order for a child who is married or an RDP to qualify a taxpayer for the Joint Custody Head of Household Credit, the taxpayer must be entitled to a Dependent Exemption Credit for the child.
Maintains their home as child’s main home for at least 146 days, but not more than 219 days.

27. 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.
4. One of the following documents defines the taxpayer’s home as the child’s main home for the above period:
<CLICK>
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 proceeding began, but before the final decree was issued.
Questions?
(Next slide - Multiple Families in Same Dwelling)
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.

28. 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.
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.
EXAMPLE:
Two roommates are splitting the cost of keeping up the home, including rent and utilities.
Neither contributes to the support of the other.
Each of them has at least one qualifying person for the head of household filing status and meets the rest of the HOH requirements.
Both may claim HOH.
<CLICK>
(Next slide - Spouses/RDPs in same house)

29. 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.
Spouses/RDPs with 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 head of household purposes if they lived in the same dwelling at any time during the last six months of the year.
(Additionally, remember Tierney/Godek rulings? Time with child split 50% - 50%, taxpayer can count half of the days which the taxpayer and the child lived in the same household with the spouse/RDP (ex-spouse/ex-RDP.)
(Next slide - Common Denial Reasons)
<CLICK>

30. 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.
COMMON DENIAL REASONS
The number one denial reason is the qualifying person did not meet the gross income test to be the taxpayer's qualifying relative. A qualifying relative's gross income must be less than the federal exemption credit amount for that year.
2006 – $3300; 2007 – $3400; 2008 – $3500. (Types not included as income: social security, AFDC, welfare, etc.)
<DOUBLE CLICK>
Next is taxpayers (TP) who are married or an RDP on the last day of the year and lived with their spouse/RDP at any time during the last six months of the year (July 1 – Dec 31). TP is not considered unmarried or considered not in a registered domestic partnership.
<CLICK>
The 3rd most common denial reason is the qualifying person did not live with the taxpayer for more than half of the year. More than half of the year means at least 183 days, or 184 days in a leap year (not 6 months, 50% of the time, half of the year).
3. Qualifying person did not live with taxpayer more than half the year.

31. 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.
Another common reason for denial is because the taxpayer is legally married or an RDP and claims a parent or a relative other than a child as their qualifying person. Taxpayers who are legally married or an RDP as of the last day of the year can only claim a birth child, stepchild, adopted child, or an eligible foster child.
<CLICK>
Many denials are issued because the taxpayer is claiming a nonrelative as their qualifying person. Sometimes this is a cousin or the child of a friend or fiancée who is living in the home. These individuals do not meet the relationship test. The law specifies a finite list of relationships for HOH, as discussed previously.
(About 30% of the 50,000 notices issued to deny the HOH filing status are for these 5 reasons.)
QUESTIONS? Stretch break, 10 minutes.
(Case Studies to Follow)

32. Case Studies Head of Household 2007
Let’s go over a few case studies of common situations that we find in our workload.
We’ll take a few minutes to look at each case scenario. I invite you to mark in your copy next to the case number whether you think the taxpayer qualifies or not and why. Then we’ll review the case together.
Note: If a particular requirement is not mentioned in these case scenarios, assume that the taxpayer meets the requirement.
The general rules covered earlier are a guideline that most people can follow to determine if they qualify to use the head of household filing status.
Use Publication Specifically, Publication 1540 details: General Rules, Self-Tests, and Legal Definitions.
<CLICK>
Head of Household
2007

33. 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 #1 Scenario
The taxpayer was 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.
(Invite audience to use knowledge discussed to make a determination on case. Use Self-Test 2 from FTB 1540.)
<CLICK>

34. 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.
Analysis:
<CLICK>
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.

35. 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.
Analysis:
<CLICK>
To be considered unmarried or considered not in a registered domestic partnership, the taxpayer must meet all of the 6 following requirements. Let’s use Publication 1540, definition for considered unmarried or considered not in a registered domestic partnership.
1. Taxpayer’s qualifying person is their birth child, stepchild, adopted child, or eligible foster child.
2. The taxpayer’s tax return was filed separately from his spouse’s/RDP’s return.

36. 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.
3. The taxpayer paid more than half the cost of keeping up his home for the year.
4. The taxpayer’s spouse/RDP did not live in the home at any time during the last six months of the
taxable year.
<CLICK>

37. 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.
5. 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.
6. The taxpayer was entitled to claim a Dependent Exemption Credit for the child. Qualifying person
must meet requirements to be a qualifying child or qualifying relative and meet the joint return and
citizenship tests.
<CLICK>

38. 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.
The Determination:
Does the taxpayer qualify?
No, does not qualify.
He did not meet the requirements to be considered unmarried. He was married as of the last day of the tax year and lived with his spouse from July 1 to November 12 which is a portion of the last six months of the year. One of the requirements to be considered unmarried is that the taxpayer cannot reside with his spouse for any portion of the last six months of the year.
Did you reach the same conclusion?
(Next slide - Case #2)
<CLICK>

39. 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 #2 Scenario
The taxpayer was divorced as of December 31. She did not live with her spouse during the tax year.
The taxpayer claimed her 8-year-old daughter as her qualifying person. The daughter lived with taxpayer for five months and lived with other parent for the rest of year.
Does the taxpayer qualify?
(Invite audience to use knowledge discussed to make a determination on case. Use Self-Test 3 from FTB 1540.)
<CLICK>

40. Case Study u No. 2 |continued|
Analysis
Taxpayer’s home must be the main home for themselves and a qualifying person who lived with them for more than half the year.
STEP 1: What is taxpayer marital status? Unmarried and not an RDP, considered unmarried or considered not in a registered domestic partnership? (Unmarried and not an RDP.)
STEP 2: Does taxpayer have a relative who might be a qualifying person? (Yes, own child.) Publication 1540, definition for child.
<CLICK>
STEP 3: General Rules: Publication 1540, page 1, 3rd bullet:
The home was the main home for the taxpayer and a qualifying person who lived with the taxpayer for more than half the year. More than half the year is 183 days; in a leap year, it is 184 days.
(Next slide - Case #2 determination)

41. 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)
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)
(Next slide - Case #3)
<CLICK>

42. 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 #3 Scenario
The taxpayer was legally married, but did not live with his spouse at any time during the tax year.
The taxpayer’s 12-year-old brother lived with him from January 1 to September 1.
Does the taxpayer qualify? Take a few minutes to make your determination. (Use Self-Test 2 from FTB 1540.)
<CLICK>

43. 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.
Analysis:
<CLICK>
Marital status: Taxpayer is legally married at the end of the year.
To use the head of household filing status, taxpayer must be considered unmarried. (Go to Publication 1540, considered unmarried or considered not in a registered domestic partnership definition.)
Remember:
Point 1: Your qualifying person is your birth child, stepchild, adopted child, or eligible foster child.

44. 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.
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. He can only claim his child.
(Next slide - Case #4)
<CLICK>

45. 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 #4 Scenario
The taxpayer is unmarried and not an RDP.
Taxpayer paid all of the costs of maintaining his home where his 17-year-old cousin lived with him all year.
The taxpayer’s qualifying individual earned $2,500 from a part-time job.
Does the taxpayer qualify?
(Invite audience to use knowledge discussed to make a determination on case. Use Self-Test 1 from FTB 1540.)
-After discussion-
<CLICK>

46. 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.
Analysis:
Taxpayer’s cousin is not one of the relatives who, by law, can qualify a taxpayer for head of household filing status.
<CLICK>

47. 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.
The Determination:
Taxpayer is unmarried and not an RDP. Needs to have either a qualifying child or a qualifying relative.
(Reference Publication 1540, qualifying child and qualifying relative definitions, list of qualifying relatives.) The taxpayer does not qualify for the head of household filing status because a cousin is neither a qualifying child nor a qualifying relative.
Cousins are descendants of a brother or sister of a taxpayer’s parents.
(Important note: Different cultures frequently use different terms for relationships than those here as defined by law, need to clarify relationship.)
(Next slide - Case #5)
<CLICK>

48. 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 #5 Scenario
The taxpayer was divorced 15 years ago.
The taxpayer’s qualifying individual is her 32-year-old son. Her son was unmarried and not an RDP, lived with her the entire year, and had a gross income of $2000.
Taxpayer provided more than half of her son’s support and paid all of the costs of keeping up the home.
Does the taxpayer qualify?
(Invite audience to use knowledge discussed to make a determination on case. Use Self-Test 3 from FTB 1540.)
<CLICK>

49. 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.
Analysis:
<CLICK>
Based on the information provided:
TP is unmarried and not an RDP.
TP 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.

50. 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
Adult son met the four qualifications as a qualifying relative, (Publication 1540, definition for qualifying relative):
Relationship Test
Gross Income Test
Support Test
Not a Qualifying Child Test
<CLICK>

51. Case Study u No. 5 |continued|
The Determination
Taxpayer qualifies because she met all of the tests.
The Determination:
Taxpayer qualifies; she met all of the tests.
(Next slide - Case #6)
<CLICK>

52. 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 #6 Scenario
The taxpayer was married and lived with her spouse until September 26. The taxpayer's divorce was final 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.
Take a few moments to determine if this taxpayer qualifies or not? (Use Self-Test 3 from FTB 1540.)
Let’s analyze this together now.
<CLICK>

53. 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.
Analysis:
<CLICK>
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.

54. 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 days allowed for each parent.
Analysis:
<CLICK>
Remember: To determine how many days the taxpayer’s home was the main home of the qualifying child, follow the guidelines below:
1. Count half the days when the TP and the child lived together in the TP’s home while the TP’s ex-spouse/ex-RDP was also living there.
2. January 1 to September 26 is 269 days. 269 days divided by 2 is days.

55. 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 days ( ).
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 days ( ).
<CLICK>

56. 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
The Determination:
The taxpayer qualifies for head of household filing status.
(Next slide - Case #7)
<CLICK>

57. 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 #7 Scenario
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.
Again, take a few minutes to make a determination about whether this taxpayer qualifies to use the head of household filing status or not. (Use Self-Test 1 from FTB 1540.)
Let’s analyze this one now together.
<CLICK>

58. 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.
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.
Does not meet the relationship test for either a qualifying child or a qualifying relative.
<CLICK>

59. 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.
The Determination:
The taxpayer does not qualify for the head of household filing status because his girlfriend's child is not one of the relatives who by law can qualify him for the status. His girlfriend's son is not related to him and does not qualify as his eligible foster child. 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.
(Next Slide – Case #8)
<CLICK>

60. 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 #8 Scenario
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.
Would you file this taxpayer as head of household? Take a few minutes to make a determination. (Use Self-Test 2 from FTB 1540.)
<CLICK>

61. 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 relative cannot earn more than the federal dependent exemption amount for the year in question.
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.
The taxpayer's son was 22 and not a student.
A qualifying relative cannot earn more than the federal dependent exemption amount for the year in question.
<CLICK>

62. 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 a qualifying relative.
The Determination:
<CLICK>
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 a qualifying relative.
(Next slide – Contacts)

63. Contacts Head of Household Information
Practitioners Hotline
Taxpayer Service Center
The last part of your Workshop Supplement, Publication 1585, (pages 17 and 18) contains references to addresses, s, fax numbers, phone numbers, and publications where you can get additional information about the head of household program.
Contact the Practitioners’ hotline or the Taxpayer Service Center for answers to your HOH filing status questions.
<CLICK>

64. Contacts Franchise Tax Board Head of Household Audit Program Contacts
Rick Mitchell |Section Manager|
Alex Davoodi |Unit Manager|
Ruth Wagner |Audit Group Manager|
These numbers are for audit administrative contacts. They are not provided to help determine the eligibility of a taxpayer for head of household.
<CLICK>

65. Thank you for inviting us to discuss this information with you.
You received a workshop survey form with the publication handouts. We appreciate your taking a few moments to complete and turn in the HOH workshop survey you were given.
This allows us to improve our presentation and answer any remaining questions that you may have about the Head of Household Program.
Thank you for inviting us to discuss this information with you.
2007