Can state tax collectors garnish my Social Security income to pay for back taxes? When it comes to tax deductions, who claims the kids after a divorce?

This week, state Franchise Tax Board expert Daniel Tahara and CPA Gregory Burke offer advice on those troublesome questions.

To see more of their advice or that of our other local experts on personal finances or careers, go to: sacbee.com/personalfinanceblog.

I've got a tax lien from the state Franchise Tax Board. With the new requirement that Social Security must be received by electronic payment, I am opening a bank account to get my monthly check. Will my account be garnished to pay my back taxes?

Social Security income is excluded from state tax collection. If the Franchise Tax Board is notified that the bank account consists only of Social Security earnings, we would not garnish your account.

It's important to note that having Social Security income does not stop earnings withholding orders from being issued, nor does it stop tax liens from being filed.

If you open a bank account and deposit your Social Security earnings, you should contact the FTB to let us know. Typically, when we locate a bank account opened by a taxpayer who has a lien filed against him/her, we may attach the bank account as part of our collection activity. In that case, you'd be required to show proof that the deposits are Social Security and therefore not garnishable.

Also note: If you deposit other income into your new bank account, the FTB can levy those non-Social Security amounts. That's why it is important to contact us and provide proof of which deposits are related to Social Security.

California taxpayers can call (800) 689-4776 or visit www.ftb.ca.gov and search for FTB Publication 1140, Personal Income Tax Collections Information.

It's different with the IRS. If you have liens for unpaid federal taxes, the IRS can garnish a portion of Social Security income to pay for back taxes, as well as unpaid child support, alimony, student loans or other federal debts.

I have a tax return question. Last year, I signed IRS Form 8332 giving my then-husband the ability to claim our youngest son on his taxes. We were separated and in the midst of a divorce. After filing last year's tax return, our divorce was finalized.

We have two kids who both live with me full time and occasionally visit their dad, who moved out of state. Our divorce agreement states that I will now claim our youngest son on my taxes. When I tried to submit my tax return online this year, it said the child exemption had already been claimed. What do I do? How do I cancel the form I signed last year?

Take a look at IRS Form 8332 that you executed last year. If Part I was completed, you agreed to release the exemption for your youngest child only for the tax year specified. If you released the exemption only for last year's taxes, for instance, you can proceed in claiming the 2012 exemption for your youngest child.

Since the IRS rejected your attempt to electronically file, you should file the old-fashioned way, using a paper return that is signed and dated. Attach a copy of the original Form 8332 that you completed and a copy of the court order granting you the tax exemption.

The IRS will send notices regarding the duplicate exemption and determine who is entitled to claim it and to whom it is disallowed.

If Part II of the original IRS Form 8332 was completed, you agreed to release the exemption for specific tax years going forward. In that case, in order to revoke the release, you need to complete Part III of a new Form 8332 and provide it to your ex-spouse, the noncustodial parent. You must also file a copy of the new form with your IRS tax return.

The change would become effective the year after you provide a copy to the noncustodial parent.

– Compiled by Claudia Buck

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