When people move to or from California, or split their time between California and another state, their tax situation becomes significantly more complex. California is known for aggressively taxing its residents, and the Franchise Tax Board actively audits residency claims. Finding a tax professional with experience in California part-year and nonresident situations is important for anyone in this position.
Why California Residency Tax Rules Are Unique
California taxes its residents on worldwide income. Nonresidents are taxed only on California-source income. Part-year residents are taxed on all income received while a California resident, plus California-source income received during the nonresident portion of the year. The FTB uses a facts-and-circumstances test to determine residency — it is not simply about where you lived for 183 days.
What the FTB Looks At
The FTB evaluates a range of factors when auditing residency claims, including:
- Location of your closest contacts (family, business, social ties)
- Location of your primary home and any vacation homes
- State where you hold a driver’s license and register your vehicles
- Location of your bank accounts and financial advisors
- Location where your doctor, dentist, and other service providers are located
What to Look for in a Tax Professional
If you are a recent mover, a snowbird with California property, or a remote worker whose employer is in another state, look for a professional who can demonstrate:
- Direct experience preparing California part-year resident returns (FTB Form 540NR)
- Familiarity with California source income rules for investment income, stock options, and pass-through entities
- Experience representing clients in FTB residency audits
- Understanding of safe harbor rules and domicile documentation strategies
Interview Questions
- Have you worked with clients leaving California for another state, and what documentation do you recommend they keep?
- Are you familiar with the FTB’s rule that presumes an individual who spends more than nine months in California during a tax year is a resident, and how that presumption can be overcome?
- How do you handle deferred compensation or stock options with California source income when the taxpayer has moved?
Finding and Verifying Help
The California Society of CPAs referral directory and the IRS Directory of Federal Tax Return Preparers are starting points. Verify CPA licenses at dca.ca.gov/cba and Enrolled Agent credentials at irs.gov.
Official sources referenced: IRS.gov, California Board of Accountancy (dca.ca.gov/cba), California Franchise Tax Board (ftb.ca.gov). Not reviewed by a credentialed tax professional.