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The def. I read of "tax liability" is the total amount of taxes that a person owes to the IRS after credit and payments are made by the taxpayer. But it seems like some people on here are using the word "tax liability" as the amount of taxes that a person paid to the IRS throughout the year. Which is it? I know the credit is subject to a limit based on tax liability but now i"m confused about what tax liability is. So should we be claiming a ton of dependents so that we actually owe lots of money during tax time or can we go ahead and claim what we normally would and get the credit in a form of a refund during tax time? I did read that some people on here did get an actual refund. I called the IRS myself and he didn't seem to understand what I was asking. He said that the credit may cause you to have a refund because of other credits. We don't normally have to pay in to the IRS at tax time. We usually get money back so does this mean that we won't be able to use the credit? Help please. So many people are coming up with differing answers. I would love to hear from people who have already done it. (or an actual CPA) Thank you! Glenda
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Your tax liability is the number you find when you look in the tax book at the tax tables - that big long graph that has incomes down one side and types of families across the top. You follow your income sideways and your type of family down, and the number you come to when those two lines meet, that you enter into a space on your forms, is your tax libility.
It does not matter if you send the IRS your money in little bits from each paycheck through the year, or if you send them a big check at tax time, or whether you found out you'd already overpaid and they send you some back at tax time. Your tax liability is exactly the same no matter which of those applies.
Ex1, if you spend more on your adoption than your tax liability amount: your tax liability is $8,000. You paid a little each paycheck and now the IRS has $9,000 of your money. You'll get $1,000 back normally, right? Well, if you adopt (and lets assume you spent exactly $10,000 on the adoption) they'll send you your $1,000 back just like normal, PLUS the $8,000 they would normally have kept, PLUS that leaves you with $2,000 to claim next year.
Ex2, if you spend less on your adoption than your tax liability amount: your tax liability is $8,000. You paid a little each paycheck and now the IRS has $9,000 of your money. You'll get $1,000 back normally, right? Well, if you adopt (and lets assume you spent exactly $5,000 on the adoption) they'll send you your $1,000 back just like normal, PLUS $5,000 they would normally have kept, and keep only $3,000 of your money.
Personally, I'd leave your number of dependants and your withholding alone. Changing them before an adoption happens is an easy way to get in debt in a hurry if the adoption does not happen when you expect it to happen.
Hope that helps!
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