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Taxes and Divorce in Mississippi
Taxes are one of life's certainties. I do not do tax work nor give tax advice. I can make some general observations that you should be ready to address with your CPA or tax attorney. I am not a CPA and I am not a tax attorney.
If you have children and you are the custodian of your children and your divorce decree does not state otherwise, you are entitled to claim your children as dependents on your tax returns. Many divorce agreements address who claims the children as dependents, and there is an IRS form accessible on the Internet which both you and your spouse may complete and send back to the IRS to effectuate your agreement.
Property settlements related to a divorce are typically not taxable, but income that is received from alimony or from an interest in a business will be taxable under most circumstances and you will need to make quarterly tax payments. Child support is not taxable to the receiving spouse and is not deductible for the paying spouse. Also, inform your employer of your divorce so that your withholdings can be adjusted and you are not burdened with a high tax payment at the end of the year.
It is important to know the tax basis of the property that you receive in the division of your assets. The basis is generally the cost of acquiring, and in some cases developing, a capital asset. If the asset has appreciated, the person who receives that asset will be responsible for tax on the appreciation when the asset is sold. Depreciation is deducting a portion of the basis of an asset. If an asset has been depreciated to a low basis, the sale of that asset can have very adverse tax consequences. This commonly occurs with rental property and business equipment.
If your divorce decree provides that you and your former spouse will sell your jointly owned residence, you will each be responsible for reporting your portion of any capital gain. Capital gain is the profit resulting from the sale of capital investments, such as the marital real estate. There are new tax laws regarding sale of capital investments, so you should definitely consult with your tax advisor if this is applicable to you.
Beware of signing joint tax returns with your estranged spouse. Although your agreement may provide for them to be responsible for any taxes, the IRS may hold you responsible in an audit.
If you have moved you need to file the correct form to notify the IRS. Without that, the notices will be sent to your old address and you may not receive them. The IRS will hold you responsible for missed deadlines.
If the couple is filing for divorce on the ground of irreconcilable differences, they can agree to joint custody and the court will grant it as being in the best interest of the child.
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