Failed Adoption and Tax Credit

Interesting. Looks like we're going to have to agree to disagree on this one. In your disagreement with me, you say that the wording of the actual law "implies" certain things. I believe that being implied and being stated are not the same thing, and that things that are not stated outright in the text of the law itself must be determined one way or another by the governmental body responsible for giving us tax forms and assessing our taxes - the IRS. You believe that being implied is the same as being stated, and therefore the IRS is not responsible for clarifying implied things. I don't think that we are going to be able to resolve this disagreement between the two of us.

Hello. We may be facing a failed adoption. If this happens, we do plan to preceed with another adoption. Can we file for both the failed adoption and the successful one - they would be in different years obviously. The failed one would be in 2010 and the successful one in 2011. But, hopefully there will not be a failed one. Just like to have a plan. Thank you.

If you read the previous 2 pages, you'll find your answers. It's been addressed all over this thread.:)

Yep, that happens in tax law, mainly because Congress generally sucks at writing clear and concise statutes. In fact, in my area of expertise (international tax), there has been a 45+ year battle between the IRS and corporations as to whether the pronoun "its" should be read in an active or passive context in a particular regulation. Still no resolution. Often it takes a court case or three to iron out ambiguities, and even then there might be a difference of opinion among courts. BTW, I was hired by the IRS this year and as a part of the hiring process our 2008 and 2009 returns were examined. I'm pleased to report that the adoption credits were not questioned (:happydance:), despite the fact that we claimed the adoption credit for two children: one for our son's adoption that was finalized in 2007 and one for our failed attempt in 2006. Unfortunately, that means I don't get to litigate the issue and get a case named after me.

I am curious how the new tax law requiring proof of adoption will now affect failed adoptions? Any ideas?[url=http://www.irs.gov/newsroom/article/0,,id=228301,00.html]IRS Issues Guidance on Expanded Adoption Credit Available for Tax-Year 2010[/url]

It's all in [url=http://www.irs.gov/pub/irs-drop/n-10-66.pdf]Notice 2010-66[/url]. If you are claiming an adoption credit for qualified expenses related to a failed (or not yet finalized) domestic adoption, you must attach one of the following to your tax return (and file it manually - no efile allowed): [INDENT](1) An adoption taxpayer identification number, obtained by the taxpayer for the child, included on the taxpayers income tax return (instead of attaching a document), (2) A home study completed by an authorized placement agency, (3) A placement agreement with an authorized placement agency, (4) A document signed by a hospital official authorizing the release of a newborn child from the hospital to the taxpayer for legal adoption, (5) A court document ordering or approving the placement of a child with the taxpayer for legal adoption, or (6) An original affidavit or notarized statement signed under penalties of perjury from an adoption attorney, government official, or other person, stating that the signor:[INDENT]A. Placed or is placing a child with the taxpayer for legal adoption, or B. Is facilitating the adoption process for the taxpayer in an official capacity, summarizing the facilitation.[/INDENT][/INDENT]

I have read a lot of the posts in this thread and it is all very confusing to me. We recently had a failed adoption and it sounds like we can file for a tax credit for those expenses. I was hoping I could explain my situation and if you have answers to the best way to go about getting the tax credits that would be great. We signed on with an agency in February of this year 2011. We paid the fees for them when we signed on. We were matched in May and paid the match fee to the agency. We then paid attorney fees and social worker fees and living expenses. Then in July when the baby was due they birth mom changed her mind. So now we are back in the waiting position. Also we were recently contacted by a birth mom and are currently trying to figure out if we can pursue a private adoption with her. My questions are: How do I go about filing for the tax credit for the failed adoption? Do I include the agency fees with the other fees that went with the failed adoption? Or do I wait till we have a successful one with that agency? Or do we file the failed adoption as one credit and the agency fees as another credit (since they were paid in 2011) with it not being finalized yet? Then will I be able to file the private adoption as one too? Thank you so much for any help you can give???

If the expenses were for a domestic adoption, you can claim the credit the year after the expenses were paid. Use Form 8839, the same as used for successful adoptions. If the expenses were for an international adoption, you can't claim the credit unless the adoption was successful. It sounds like you were working on a domestic adoption and that you paid the expenses in 2011. So you would have to wait until you filed your 2012 tax return to claim the credit. Agency fees are generally qualified adoption expenses. You would probably include them when you claim the credit for the failed adoption. All the expenses for the failed adoption (including the agency fees) were paid in 2011, correct? Then you claim them on your 2012 tax return. If and when the private adoption is successful, you would claim a credit for those expenses in the year the adoption is finalized. There is a disagreement among members of the forum about whether you can claim the full credit for the failed adoption as well as for the successful adoption. The official IRS position, as stated in the instructions to Form 8839, is that your total credit for the successful adoption must be reduced by credits claimed for previous unsuccessful adoptions. But that position is not supported by the plain text of the statute and several prominent adoption law practitioners.

So when you say this are you saying that I can claim the agency fees with the failed adoption and then claim the same fees again with the successful adoption?I was trying to decide the best way to do this all and in trying to make this decision I wondered if the adoption tax credit would still be refundable in 2012. I know that it hasn't always been refundable and it may or may not be next year. Does anyone know yet about that or where I can find out?Anyway what I came up with was in case it isn't refundable in 2012 when we may have a successful adoption I was thinking I should file the adoption fees as an adoption that is not yet finalized since we aren't matched and then filing the fees for the failed adoption separately as a failed adoption. Is that the best option? With the fees we have paid the agency there were initial fees for marketing and such then there was a match fee so can I put the match fee with the failed expenses?I talked to one accountant and she doesn't do this much but she said the adoption has to be finalized to file. Who should I talk to that can help me get it all worked out and filed? Are there people who specialize in this? Is there anyone on here who does taxes with extensive knowledge of the adoption tax credits that could do it all over the computer and phone?

I just wrote a reply above but I went a looked at the form and now I am wondering if I can filed them separately like I am hoping I can do I just use the same form and put it as child 1 and child 2? Technically they are different because the failed one is one child and once we have a success if will be a different child. Also since one is failed and one is incomplete what do I put as child identifying number?

That's what I did, child 1 was unsuccessful adoption and child 2 successful adoption. Since you wouldn't have an ATIN or SSN for child 1 you need to attach a statement as to why you don't have one. See the instructions to Form 8839 (page 4) for the documentation you need to attach.

I posted this above my last comment but am not sure you saw it so I wanted to repost it. So when you say this are you saying that I can claim the agency fees with the failed adoption and then claim the same fees again with the successful adoption? I was trying to decide the best way to do this all and in trying to make this decision I wondered if the adoption tax credit would still be refundable in 2012. I know that it hasn't always been refundable and it may or may not be next year. Does anyone know yet about that or where I can find out? Anyway what I came up with was in case it isn't refundable in 2012 when we may have a successful adoption I was thinking I should file the adoption fees as an adoption that is not yet finalized since we aren't matched and then filing the fees for the failed adoption separately as a failed adoption. Is that the best option? With the fees we have paid the agency there were initial fees for marketing and such then there was a match fee so can I put the match fee with the failed expenses? I talked to one accountant and she doesn't do this much but she said the adoption has to be finalized to file. Who should I talk to that can help me get it all worked out and filed? Are there people who specialize in this? Is there anyone on here who does taxes with extensive knowledge of the adoption tax credits that could do it all over the computer and phone?

You can only get one tax credit for multiple attempts to adopt one child. For example, you are trying to adopt a baby, and have had one failed adoption attempt and one successful adoption. You can only take one credit and must combine the expenses for both the failed attempt and the successful one together. The IRS instructions are very clear on this. See the information below from their instructions for form 8839."Attempted AdoptionsIf you made more than one attempt to adopt one eligiblechild, combine the amounts you spent and complete onlythe “Child 1” line. Do not report the additional attempt(s) on the “Child 2” or “Child 3” line. Complete the “Child 2” or “Child 3” lines only if you adopted or tried to adopt two or three eligible children.Example. You planned to adopt one child. You had one unsuccessful attempt to adopt a child and later successfully adopted a different child. Complete only the “Child 1” line because you made more than one attempt to adopt one eligible child."

In 2013 we had a failed adoption of siblings. We are trying to get the failed adoption credit, but we do not have a social security number for either of the children or any other identifiable numbers for them? suggestions on how to go about this on the form...we are trying to use Turbo tax and finding it difficult.

For a failed adoption, you would simply include the contact information for your agency or attorney. If you are audited, be prepared to submit a (signed and notarized) letter from that agency/attorney stating that you are indeed approved to adopt a child and that you have indeed paid fees to them. HOWEVER - if your fees were paid in 2013, you can NOT claim them on your 2013 taxes that you are filling out now. You must wait until your 2014 taxes. The IRS says you must wait to claim your expenses until either the same year the adoption finalized, or the year AFTER the fees were paid. So you can not claim them on your 2013 taxes, since you did not have a finalized adoption in 2013. I'm sorry on your behalf. Most people are glad the IRS allows you to claim failed domestic adoption expenses at all, but it really hurts families to have to wait that whole year.