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The Adoption Tax Credit

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Ok - I am confused.....but this was from the IRS site ( http://www.irs.gov/newsroom/article/0,,id=220809,00.html ) - updated 1/3/2012. Spotlights the need for an experienced CPA!

Adoption Credit

The Affordable Care Act raises the maximum adoption credit to $13,360 per child, up from $13,170 in 2010 and $12,150 in 2009. The adoption tax credit is refundable for tax year 2011, meaning that eligible taxpayers can get it even if they owe no tax for that year. In general, the credit is based on the reasonable and necessary expenses related to a legal adoption, including adoption fees, court costs, attorney’s fees and travel expenses. Income limits and other special rules apply. In addition to attaching Form 8839, Qualified Adoption Expenses (see instructions), eligible taxpayers must include with their 2011 paper tax return one or more adoption-related documents to avoid delaying their refund. Taxpayers may also be asked, after filing their returns, to substantiate any qualified adoption expenses they paid.

For other information, see our news release, tax tip, questions and answers, flyer, Notice 2010-66, Revenue Procedure 2010-31, Revenue Procedure 2010-35 and Revenue Procedure 2?

http://www.youtube.com/watch?v=eQryETwRziA&feature=email

Is this from 2010? 2011 is not refundable.

Edited by donnag

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This is all great info! Best advice my accountant gave me was to keep receipts for everything and have it organized. Makes my head spin and glad we have a CPA. :unsure: I never was a numbers gal.

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Jenni - and other - thought this might be of interest for you given that the first child was not the one God had intended to be in your family.

Eligible expenses must be "directly related" to the adoption of an eligible child. This may include adoption fees, legal fees, and court costs. Expenses for a failed adoption might qualify for the credit if followed by a successful adoption, but the two adoption efforts would be considered as one adoption and subject to the dollar limit per eligible child. The editors of JK Lasser's Your Income Tax advise.

It is all confusing...but I do know those in the TIKLV group can claim the initial application, orientation, pre-adoption education and escrow fees. Also included would be travel and lodging for the orientation. This is because all of this occurs in 2010 and for nonfinalized adoptions you claim the following year. As I am not a CPA or expert by any means - I am signing out on this topic!

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Eligible expenses must be "directly related" to the adoption of an eligible child. This may include adoption fees, legal fees, and court costs. Expenses for a failed adoption might qualify for the credit if followed by a successful adoption, but the two adoption efforts would be considered as one adoption and subject to the dollar limit per eligible child. The editors of JK Lasser's Your Income Tax advise.

Ditto on this... our accountant specializes in adoption (Memphis folks, feel free to PM me for his info if needed). He helped us navigate LAST YEAR, filing taxes for our failed placement (just before Oliver's placement). We could file for the same year it happened (failed 2010, filed with 2010 taxes). However, we're filing our 2010 placement (2011 finalization) with our 2011 taxes. While we didn't get back a HUGE amount, it was around $4k! Our accountant explained it as "per attempt, followed by a successful placement."

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I said I was through but here is the P.S. This document from the IRS indicates the expenses for 2010 and 2011 are refundable. It is also a good review of what the code states. It was reviewed and updated in Dec 2011. I am going to take an Aleve now and leave the rest to our numbers gal.

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We filed our 2010 tax return with 2 adoptions on it (expenses from collin's and parker's adoptions) and we had ZERO issues getting our full refund in like 4 weeks after paper mailing our tax return (we actually got our refund faster than the IRS said we would). I am sure it didn't hurt that I am a tax CPA and am meticulous about all the details on my tax return (if there are any small issues on your return the IRS will question whether there are big issues as well and review your return with greater scrutiny) but either way I did not have to mail in receipts or copies of checks or any explanations with our intial filing (though I certainly have all of it on hand if the IRS asked for it at any point). I did include copies of final adoption decrees for both kids (official copies with original stamps - these were not our originals but extra official copies we had on hand) as per the IRS instructions.

As always anything you mail to the IRS send using some kind of trackable mail or package service so you have proof of mailing and delivery confirmation.

When in doubt seek the advice of a CPA.

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Our biggest problem getting our return last year was after I sent in the orginal return with all supporting docs, somehow not sure how both kids' social security numbers got transposed and they both became old men in the eyes of the IRS. It was a crazy ride. I am hoping it is smoother for everyone this year.

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We filed our 2010 tax return with 2 adoptions on it (expenses from collin's and parker's adoptions) and we had ZERO issues getting our full refund in like 4 weeks after paper mailing our tax return (we actually got our refund faster than the IRS said we would). I am sure it didn't hurt that I am a tax CPA and am meticulous about all the details on my tax return (if there are any small issues on your return the IRS will question whether there are big issues as well and review your return with greater scrutiny) but either way I did not have to mail in receipts or copies of checks or any explanations with our intial filing (though I certainly have all of it on hand if the IRS asked for it at any point). I did include copies of final adoption decrees for both kids (official copies with original stamps - these were not our originals but extra official copies we had on hand) as per the IRS instructions.

As always anything you mail to the IRS send using some kind of trackable mail or package service so you have proof of mailing and delivery confirmation.

When in doubt seek the advice of a CPA.

Our social worker in SC has put us in touch with a CPA who has experience with adoption tax credit and has filed quite a few. This CPA also does our social worker's business taxes....

I am clinging to her and hope it will make the process MUCH easier (taxes TERRIFY me)

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Hello!

I know we are trying to figure out the tax credit since we finalized last year, but we want to make sure the tax credit continues for those who will be finalizing an adoption in the future. We sent a sample letter and the info. below out to family and friends since the tax credit is changing and set to expire in 2014. Please consider sharing this with your family and friends and writing your representatives. If you want to see the sample letter, I'd be happy to share it with you.

Find your senators' e-mail addresses: http://www.senate.gov/general/contact_information/senators_cfm.cfm

Find your representative's e-mail address: https://writerep.house.gov/writerep/welcome.shtml

The Future of the Adoption Tax Credit:

• 2010 – Past filing year. The credit was $13,170. Refundable. No documentation of

expenses for special needs adoptions.

• 2011 – The credit is $13,360. Refundable. No documentation of expenses for

special needs adoptions.

• 2012 – The credit amount will be around $12,500. NOT refundable. No

documentation of expenses for special needs adoptions.

• 2013 – The credit will be $6,000. NOT refundable. Families will need to document

qualified expenses. (source: http://voice-for-adoption.org/sites/default/files/IRS%20Annoncement-Adoption%20Tax%20Credit.pdf)

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Thanks for all the great info. I am going to have to read through in depth. Per Melissa's post little confused if our first failed match would count as its own attempt, meaning two separate refunds since it was the same tax year and Colin's adoption won't be final until 2012.

Guess I'll find out when we meet with accountant. Good thing I kept good records.

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Thanks for all the great info. I am going to have to read through in depth. Per Melissa's post little confused if our first failed match would count as its own attempt, meaning two separate refunds since it was the same tax year and Colin's adoption won't be final until 2012.

Guess I'll find out when we meet with accountant. Good thing I kept good records.

We had a failed match in 2010 and a successful placement in 2011. Our failed attempt counted as it's own attempt... and we could count it on our 2010 taxes. Oliver's however, we'll have to file on our 2011 taxes since we finalized in 2011! For sure, everything feels hazy until the accountant explains things. I still don't 100% understand.

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Thanks for clarifying Melissa!

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Thanks for all the great info. I am going to have to read through in depth. Per Melissa's post little confused if our first failed match would count as its own attempt, meaning two separate refunds since it was the same tax year and Colin's adoption won't be final until 2012.

Guess I'll find out when we meet with accountant. Good thing I kept good records.

Your accountant will be able to clarify this, but because some of your expenses were incurred in 2010, you can actually apply for your tax credit now (that is,if things haven't changed since we did this -- we were advised that we should go ahead and apply and not wait until the following year).

Our situation was similar to yours - we went to orientation in 2008, took placement of Hugo in 2009, and finalized in 2010. But all of our expenses from 2008 (agency fees, orientation, travel expenses, escrow expenses, etc) added up to just shy of the credit amount, so we filed for the credit on our 2009 taxes (in 2010 - BEFORE we finalized) and got it, no problem. Then we filed for the remaining amount of the credit on our 2010 taxes, after we finalized.

Just seemed like if we could get a chunk of the credit a year earlier, why wait? Anyway, hope this makes sense and hope your accountant is helpful!

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Thanks for all the great info. I am going to have to read through in depth. Per Melissa's post little confused if our first failed match would count as its own attempt, meaning two separate refunds since it was the same tax year and Colin's adoption won't be final until 2012.

Guess I'll find out when we meet with accountant. Good thing I kept good records.

Your accountant will be able to clarify this, but because some of your expenses were incurred in 2010, you can actually apply for your tax credit now (that is,if things haven't changed since we did this -- we were advised that we should go ahead and apply and not wait until the following year).

Our situation was similar to yours - we went to orientation in 2008, took placement of Hugo in 2009, and finalized in 2010. But all of our expenses from 2008 (agency fees, orientation, travel expenses, escrow expenses, etc) added up to just shy of the credit amount, so we filed for the credit on our 2009 taxes (in 2010 - BEFORE we finalized) and got it, no problem. Then we filed for the remaining amount of the credit on our 2010 taxes, after we finalized.

Just seemed like if we could get a chunk of the credit a year earlier, why wait? Anyway, hope this makes sense and hope your accountant is helpful!

This is what we're planning to do, too. We applied for an adoption tax id number for Joseph as soon as we got back home from Texas and received it sometime in December, so we should be good to go.

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Beth - would you please share how you started this process. Thanks!

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Beth - would you please share how you started this process. Thanks!

We also got an ATIN and needed it before getting our taxes done since Oliver didn't have a social security # yet.

Here's the link we used to get started. We actually had to file an extension on our taxes b/c we were waiting on this number.

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Sorry for the delay in responding, but it looks like Melissa has it covered, as usual :)

The link she gave you spells everything out. Here's the direct link to the form that we sent in in September - http://www.irs.gov/pub/irs-pdf/fw7a.pdf. When we sent the form off, we just included a copy of the placement agreement we received from Abrazo on placement day. That seemed to work just fine. There were no hiccups, just a normal wait time of several weeks to get the number back in the mail.

If I can help with any more detail, please just ask.

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We are meeting with the CPA this Monday.

I applied for the extension last March so we only have a month left to the October 15th deadline.

I went back and forth about whether to do it myself but I thought it was best to have a CPA do it that know about the adoption credit, etc.

We met with someone prior and I hope that they will be able to help us with it. She gave a overview at church last year and she really knew her stuff.

I think it's best to pay $350 to have it done right the 1st time.

Finger's crossed the meeting is successful Monday and we are able to file!

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Hi-

Did anyone get a partial refund after filing and then received the rest? We received a little bit of a refund in our account this morning from the IRS but I have not idea why. It's no where near the amount we should we receive back according to our filing.

We have not received a letter or anything saying our file is under reeview. I mailed them off October 5th (I used the tax extension this year).

Any guidance would be appreciated!

Thanks

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Ok, We received the small amount we would have received back without the credit.

The Adoption Tax credit is currently under review and we should receive a letter soon requesting additional information.

I sent them all of the required information and receipts.

So lets hope they are favorable in their review and we will not have to resend everything!

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Hi-

Did anyone get a partial refund after filing and then received the rest? We received a little bit of a refund in our account this morning from the IRS but I have not idea why. It's no where near the amount we should we receive back according to our filing.

We have not received a letter or anything saying our file is under reeview. I mailed them off October 5th (I used the tax extension this year).

Any guidance would be appreciated!

Thanks

Welcome to our world. This happened last year (and again this year). We got a partial refund and then had to have our accountant provide the additional information needed to give us the rest. The letter we received from the IRS stated that they needed xyz in order to provide us with the rest of our refund. We immediately provided it and then received the rest of the refund within a month or two.

We have been strung along since February by the IRS this time around. We just got word yesterday that they are refunding about half of our return (all of the non-adoption-related stuff) and that we're supposed to receive a letter in the mail early next week stating why we weren't approved to get the rest. Our accountant says we are due the return and have everything we need, so no matter what they come back with, we can supply it and hopefully get our money back. We were on the phone with him at 6pm last night trying to sort all this mess out.

It's working my last nerve because we need this money to move forward with adoption #2 without tapping into our emergency savings account. I just can't rationalize moving forward with another adoption that would make us tap into those funds. So, we wait. It may mean our plans are pushed back, but hopefully the money will eventually come. Something tells me I'll be getting my 2012 tax reimbursement before these ever come in. We are currently looking into the option of receiving half of our funds (what they say we are due - all non-adoption-tax-credit-related monies) and then appealing for the other half. We just need that non-adoption-related money back to move forward in good conscious. Part of me is afraid they will take that back from us, too, and we could move forward with the next adoption if we could just get half back. We're seeing what would be involved in doing that now, so I'm surprised to hear that part of your reimbursement was already put into your account, Leah. That gives me hope!

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We had the same thing happen, Leah. We filed in March. We got everything but the adoption tax credit amount back first - a few weeks later. We got a letter requesting more information which we immediately sent in and then eventually got the full amount back in July, I think it was. It might have been August.

Melissa - if you need to know what all we sent in, just let me know and I'll dig it up. I hope you will get your full refund SOON!

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Yes the same thing happened with ours. We did finally get it but it took several additional months.

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Melissa - if you need to know what all we sent in, just let me know and I'll dig it up. I hope you will get your full refund SOON!

Our CPA specializes in this! Both times the IRS has come back asking for things, it was something we'd already sent (and had copies of having sent in!) Our poor CPA is ready to bang his head on the wall, I think. I feel like we're always the exception to the rule in some way in our lives, so I can't say I'm surprised when things like this happen. I'm just trying to sit back and smile that maybe God is putting us on hold for a little while longer. :)

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Thanks for the quick responses, y'all!

We spoke with the accountant a few times but he said since I had done all of the work, that I should just send it in. He said it all looked in order and he did not charge us, so I thought that was nice. But now, I think maybe I should have let him file it. Oh, well.

We have several copies of all our documentation so I hope their request is minimal and they can process the rest of our claim soon.

But this year, with us buying a new house this past Tuesday, I'm definitely going to use the CPA.

Melissa-I hope y'alls stuff get sorted soon, too!

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