The FTB will mail approximately 130,000 Head of Household audit letters beginning in July. Although most of the notices go to individuals who filed paper returns, an e-filed return is also subject to inspection. (Letters will continue later in the year after all returns have been filed.)

If your client receives a notice, make sure that you accurately complete pages 3 and 4, provide supporting information, and fax it to: 866-223-8195.

Failure to respond to the questionnaire will result in a Notice of Proposed Assessment that disallows the taxpayer's HOH filing status. If your client protests the assessment, the FTB will launch a full-blown HOH audit.

On another note, the FTB will begin mailing notices in August to certain corporations, reminding them of their obligation to report all federal changes to the Franchise Tax Board.

Corporate entities are required by law to properly notify the FTB of each finalized federal determination. This can be met by either filing Form 100X, Amended Corporation Franchise or Income Tax Return, or faxing a letter with complete copies of the federal changes to: 916-843-2269.