Late to the Adoption Tax Credit party
I adopted my two sons through the foster care system in Tx in 2005. I have always used Turbo Tax and filed electronically. I did not claim the adoption credit that year because I didn't realize I qualified for it as I had no out of pocket expenses. However, my sons do fit the the "special needs" status in several categories and do receive monthly state subsidy.

A month or so ago, my caseworker notified me and told me about the change to the adoption credit and the possibility of a refund. I have copies of everything I need. The problem I have is I have to amend every refund from 2005-2010. The turbo tax software is only available back to 2008, so I am having to try and do it all the old fashioned way. I know it all has to be done by hand and mailed in, but I was hoping to have the software to guide as to what would change from what I originally filed. I have read and researched and spent hours trying to understand it all.

I'm single and a teacher, and at one point had 4 dependents not including myself. So, I have always gotten my full refund on what I paid in, and most years the CTC and EIC. That being said, the form 8839 is confusing and so is the publication 972. I think I have finally figured out that basically I can take my tax liability each year and subtract that from the adoption credit (which would have increased my refund every year) and then carryover what is left to the next year. But, I cannot figure out how to fill out form 8839 or 972, I have read the full instructions many times, but it is a little overwhelming. I don't have the money to take it to a tax expert, especially considering that some people sound like they are hitting lots of road blocks on actually getting their refunds.

Does anyone have any suggestions? I know you guys are all probably sick of answering questions, but it sounds like there have been lots of experience here.

Thanks!

Alana Beck
I know you said you don't have the $$$ to go to an expert, but this is one thing we would have done if we weren't already. This stuff CAN get/be sticky.....and FWIW, we had H&R Block do ours (as they have for yrs).....and we got our full refund pretty quickly. (As in within a month's time.)
Having to go back that many years, I think going to someone who's in the business would be wise if you can swing it at all....

Sincerely,

Linny
There is an instinct in a woman to love most her own child - and an instinct to make any child who needs her love, her own. ~Robert Brault
I agree with hiring an expert. Heck, I'd put my mortgage on a credit card one month to free up the cash! Its not something I would ever try to do on my own.
Nevada Jen said...
I agree with hiring an expert. Heck, I'd put my mortgage on a credit card one month to free up the cash! Its not something I would ever try to do on my own.


This. Two special needs adoptions from 2005 should net you $21,260. Since you can usually only amend 3 years back and they are making an exception in this case, I would absolutely want a CPA to be on my side. If your kids get a monthly stipend and you had no tax liability 2005-2010, you should absolutely qualify.

Another thought ... Have you tried getting help from a Tax Advocate? I'm not sure that they can help with the form, but may be able to point in the direction of free/low cost resources.

Good luck!
I doubt it would be too costly to have a pro do it. Just putting out numbers from the air...If it costs you $4,000 and you end up getting a refund of $21,000 that you didn't otherwise expect all these years, you end up with much more than you spend.
And that's a high estimate on the cost. I seriously doubt it would cost that much to amend your taxes. We completed our adoption in 2006, and I recall it being over $10,000 credit back then, for one child.

Also, keep in mind that doing this makes it more likely you'll be audited, ESPECIALLY if you plan on doing it without a tax consultant. The higher the change from previously, the higher the chances there's a red flag raised. Not only do your chances decrease of being audited by using a professional, but also, hiring a professional will make it much easier on you if you do end up being audited because they will, in most cases represent you.
I would pay a tax attorney with a credit card if I had to, and then pay the minimums on the credit card till I got my refund. If everything you are saying is accurate, it will be a hefty refund.
Beth. said...
This. Two special needs adoptions from 2005 should net you $21,260. Since you can usually only amend 3 years back and they are making an exception in this case, I would absolutely want a CPA to be on my side. If your kids get a monthly stipend and you had no tax liability 2005-2010, you should absolutely qualify.

Another thought ... Have you tried getting help from a Tax Advocate? I'm not sure that they can help with the form, but may be able to point in the direction of free/low cost resources.

Good luck!


Just curious, is the IRS for sure making an exception for adoptions? Or are you assuming that, in the OPs situation the IRS is?
KarenInCa said...
Just curious, is the IRS for sure making an exception for adoptions? Or are you assuming that, in the OPs situation the IRS is?


It's an execption they are making for the adoption tax credit. So for anyone that adopted 2005-2009 ... they would be able to go back and amend their returns even if it means amending greater than 3 years back.
Has anyone heard yet if they are extending the credit, reducing it, or getting rid of it, yet? Just curious!
ErinandWill said...
Has anyone heard yet if they are extending the credit, reducing it, or getting rid of it, yet? Just curious!


It's signed into law for 2012. It's $12,650, non-refundable. All the recent hoopla on the tax credit is that it went refundable 2010/2011 only. I doubt we'll see that one again anytime soon. From what I know, they have not extended into 2013, but they likely will sometime early next year.
That's what kills me the most about this wait for our second daughter from China.....I lost my adoption credit with my work (it used to be $5,000 when we started this wait, and now it's also possible to lose the adoption credit with the IRS when we finalized in 2013 or 2014 (I HOPE), and we are possibly losing these credits to no fault of our own. Too bad the tax credit can't be ongoing in smaller increments, for money put out, not necessarily after the adoption is finalized....waaaaaa!!!
KarenInCa said...
Just curious, is the IRS for sure making an exception for adoptions? Or are you assuming that, in the OPs situation the IRS is?


I have not heard that the IRS is permitting people who amend earlier returns (prior to 3 years ago) to receive any money back for those returns.

BUT, if amending those older returns allows you to claim more of a return within the most recent 3 years, then refiling those older returns is allowable.

For instance. If you adopt in 2005 and didn't do any federal adoption tax credit stuff because it would only be peanuts, and then decide that because it's refundable in 2010 that you should:

First you re-do your 2005 taxes, and find out how much you should have gotten back, and what your carryover is. You can't get that money back, because it's more than 3 years ago. Then redo your 2006 taxes, using the carryover, and figure out how much you would have gotten back and how much your new carryover is. (Still can't get that money back.) Same for 2007 - use the new carryover amount, figure out how much you would have gotten back in 2007, and whta your new carryover is - but without getting the money back.

Then you hit 2008 - redo the taxes with the new carryover amount, figure out how much you would have gotten back, andyour new carryover amount. You DO get that money back. In 2009, same thing - new carryover entered, how much you get back, and new carryover amount - you DO get that money back. In 2010, enter new carryover amount, and because it's refundable you get ALL that remaining carryover and you're finished.

You don't get any of the potential money back for the 2005-2007 years, because they are too old. But you do get the 2008 - 2010 money back, because that's within the past 3 years. But if you don't redo your 2005-2007 taxes, you would not have the correct numbers to know what to put on your 2008 taxes. Therefore, you have to redo the tax returns from the date of the adoption even though you can not receive any money back from those earlier amended returns.

Hope that helps!
Instead of just guessing why not look at irs.gov

As far as paid preparers it won't cost that much.

However, doing it yourself does not increase your chances of being audited. That is just a old wise tale put out by paid preparers to scare people into paying them. In this case though it is more complex than a normal issue and it sounds like a paid preparer might be a good idea.

The reason this is likely to be audited is because this much money will bring out the criminals who don't have children.

A word of caution the the subsidy, if you yourself are not paying more than half the cost to support your child, you may not be able to claim the exemption or child tax credit. With the subsidy, including daycare, medical card etc. I'm not sure I can claim my child.
BarbaraM said...
A word of caution the the subsidy, if you yourself are not paying more than half the cost to support your child, you may not be able to claim the exemption or child tax credit. With the subsidy, including daycare, medical card etc. I'm not sure I can claim my child.


This is not true. It USED to be true for foster children, but claiming a child as your dependent hasn't been limited in this way for several years.

If the child is YOURS (Biological or adopted) then it only matters who the child lives with, and who pays the child's costs is irrelevant.

If the child is a foster child, then you only have to be concerned with who pays the child's costs if the CHILD, himself, personally, pays out of his own pocket for more than half of his expenses. If the state pays his expenses, then it doesn't matter.
DianeS said...
I have not heard that the IRS is permitting people who amend earlier returns (prior to 3 years ago) to receive any money back for those returns.

BUT, if amending those older returns allows you to claim more of a return within the most recent 3 years, then refiling those older returns is allowable.

For instance. If you adopt in 2005 and didn't do any federal adoption tax credit stuff because it would only be peanuts, and then decide that because it's refundable in 2010 that you should:

First you re-do your 2005 taxes, and find out how much you should have gotten back, and what your carryover is. You can't get that money back, because it's more than 3 years ago. Then redo your 2006 taxes, using the carryover, and figure out how much you would have gotten back and how much your new carryover is. (Still can't get that money back.) Same for 2007 - use the new carryover amount, figure out how much you would have gotten back in 2007, and whta your new carryover is - but without getting the money back.

Then you hit 2008 - redo the taxes with the new carryover amount, figure out how much you would have gotten back, andyour new carryover amount. You DO get that money back. In 2009, same thing - new carryover entered, how much you get back, and new carryover amount - you DO get that money back. In 2010, enter new carryover amount, and because it's refundable you get ALL that remaining carryover and you're finished.

You don't get any of the potential money back for the 2005-2007 years, because they are too old. But you do get the 2008 - 2010 money back, because that's within the past 3 years. But if you don't redo your 2005-2007 taxes, you would not have the correct numbers to know what to put on your 2008 taxes. Therefore, you have to redo the tax returns from the date of the adoption even though you can not receive any money back from those earlier amended returns.

Hope that helps!


This is exactly what I had to do with H & R Block. It's been a complete nightmare with H & R Block and the government.

Each time they move your taxes to a different department not all or any of your supporting documentation follows. I filed by mail on April 13th. I just got a letter on Saturday saying they needed mor information, so today I'm going to meet with my H & R Block tax person to see what I need to send this time.

I feel it's almost like they don't want to give me the money and are hoping if they give me enough hoops to jump through I'll finally give up. It isn't happening! The IRS tells me though they have so many people committing adoption tax fraud, they just have to be extra careful. So eight months later, I still don't have my adoption tax refund and look it's time to file for 2011. Ah the joys! Thank God I wasn't counting on this money for anything important, like say another adoption.

Best of luck!
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