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The Internal Revenue Service Sept. 29 issued Revenue Procedures 2010-31 and 2010-35, along with Notice 2010-66, giving guidance on the expanded adoption credit included in the Patient Protection and Affordable Care Act (Pub. L. No. 111-148).
A draft version of Form 8839, Qualified Adoption Expenses, was also released by IRS. The form will be used by eligible taxpayers to claim the expanded adoption credit on tax returns filed next year, IRS said.
[URL="http://www.irs.gov/pub/irs-drop/rp-10-31.pdf"]Rev. Proc. 2010-31[/URL]
In Rev. Proc. 2010-31, safe harbors are provided for determining the finality of foreign adoptions for purposes of the adoption credit under Section 36C (formerly Section 23) and the exclusion for employer reimbursements under Section 137, IRS said.
Taxpayers under the scope of the revenue procedure meeting the safe harbor requirements can rely on that safe harbor to determine when a foreign adoption of an eligible child is final, IRS said.
Rev. Proc. 2010-31 offers safe harbors for claiming adoption credits and exclusion for qualified adoption expenses for adoptions governed by the Hague Convention on Protection of Children and Co-operation in Respect of Intercountry Adoptions and subject to the Intercountry Adoption Act (IAA) of 2000 (Pub. L. No. 106-279), IRS said.
Taxpayers within the scope of the revenue procedure will not be challenged by IRS on the taxpayer's treatment of the adoption finalized in another country covered by the convention, IRS said.
Those within the scope of Rev. Proc. 2010-31 will not be challenged by IRS on their treatment of an adoption of a child as being finalized in the taxable year that a state court enters a final decree of adoption, the revenue procedure said. This, however, is contingent upon the child's entering the United States for an adoption subject to section 301(c) of the IAA (IHCC).
Rev. Proc. 2010-31 is effective Sept. 29, 2010, IRS said. Taxpayers can file amended returns to claim credits for qualified adoption expenses paid in tax years 2008 and 2009.
[URL="http://www.irs.gov/pub/irs-drop/rp-10-35.pdf"]Rev. Proc. 2010-35[/URL]
Two sections of Rev. Proc. 2009-50 are modified and superseded by Rev. Proc. 2010-35. Changes made to sections 3.03 and 3.14 of Rev. Proc. 2009-50 reflect the statutory amendments made by the PPAC.
Those amendments affected the adoption credit under Section 36C (formerly Section 23)and the exclusion for adoption assistance programs under Section 137.
According to the revenue procedure, the credit allowed for an adoption of a child with special needs for taxable years beginning in 2010 is $13,170. The maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $13,170, IRS said.
For taxable years beginning in 2010, the maximum amount excludable from an employee's gross income for adoption of a child with special needs is $13,170, and the maximum amount for expenses paid or incurred by an employer for qualified adoption expenses in an adoption assistance program for other adoptions made by an employee is $13,170, IRS said.
Available adoption credits and amounts excludable from an employee's gross income start to be phased out for taxpayers with a modified adjusted gross income (MAGI) of more than $182,520, IRS said.
Available adoption credits and amounts excludable from an employee's gross income are phased out entirely for those with a MAGI of $222,520 or more, IRS said.
Sections 3.03 and 3.14 of Rev. Proc. 2009-50 are modified and superseded effective for taxable years beginning in 2010, IRS said.
[URL="http://www.irs.gov/pub/irs-drop/n-10-66.pdf"]Notice 2010-66[/URL]
An amount of an adoption credit claimed in an earlier taxable year carried forward by a taxpayer to a taxable year beginning in 2010 is permissible as a refundable tax credit and not subject to income limitations in that year, according to Notice 2010-66, which provides interim guidance on the adoption credit.
Taxpayers must furnish IRS with copies of applicable documents in order to substantiate their adoption or attempted adoption of an eligible child in order to claim the credit, the notice said. Those copies should be attached to income tax returns for the taxable year they are claiming the credit beginning after Dec. 31, 2009, the notice said.
Notice 2010-66 is effective for taxable years beginning after Dec. 31, 2009.
The draft Form 8839 can be found at [url]http://www.irs.gov/pub/irs-dft/f8839--dft.pdf[/url].
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