The Refundable Adoption Tax Credit for 2011 and 2012 Taxes

Are you eligible for the refundable adoption tax credit for 2011? What changes are planned for 2012 in this tax credit for adoption? Our guests are Mark McDermott, adoption attorney and adoption tax credit expert; Megan Lindsey, Director of Infant Adoption Training Initiative and Assistant Director of Policy for the National Council For Adoption; and Josh Kroll, the adoption tax credit expert at the North American Council on Adoptable Children.

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Hit the Highlights
  • What is the adoption tax credit for 2011? What is the adoption tax credit for 2012. How does the credit differ from 2011 to 2012?
  • Tips for Avoiding Delays in receiving your refundable adoption tax credit for 2011 taxes?
  • Timing of when you can claim adoption expenses is important since the credit was refundable in 2011, but not refundable for 2012. If you incurred adoption expenses in 2011, but your adoption was not final until 2012, can you take the expenses incurred in 2011 on your 2011 taxes and get the refund? Does it matter if the adoption was domestic, international, or from foster care?
  • Will applying for the adoption tax credit automatically flagged you for an IRS audit?
  • Can we receive the adoption tax credit for a foreign or international special needs adoption?
  • Can we receive the adoption tax credit for a domestic special needs adoption that is not from foster care? A private domestic adoption of a child with special needs?
  • What documentation does the IRS require for special needs adoptions?
  • Can you file for the special needs adoption tax credit if you find out after the adoption that your child has special needs? Can you go back and amend your past returns if your child is diagnosed after the adoption with a qualifying special need?
  • How long do you have to utilize the adoption tax credit? How many years will it carry forward or carry over?
  • How far back can you claim the adoption tax credit if you are filing in 2012 for your 2011 taxes?
  • Can you amend your past tax returns to claim the adoption tax credit for 2011 taxes?
  • When filing for the adoption tax credit for years in the past, what credit amount do you use—the one for 2011 or the one for the year the adoption expenses were incurred? When you amend past returns to take advantage of the federal adoption tax credit, what credit amount are you eligible for?
  • Can you received the adoption tax credit for a special needs adoption is the state paid for most of your adoption expenses?
  • When can you claim adoption expenses on your taxes—the year they were incurred or after the adoption is finalized?
  • For Special Needs adoptions, if the adoption was begun in 2011, but not finalized until 2012, can you claim the refundable adoption tax credit?
  • What will the federal adoption tax credit be for adoptions finalized in 2012?
  • If you receive the full credit one year, but had additional expenses the next year, can you claim these additional adoption expenses on your 2011 taxes?
  • Can you claim the remainder of your adoption expenses that were over the adoption tax credit limit the following year?
  • Can you claim adoption expenses for a failed adoption or for placements/matches that fell through or when a birth mother changed her mind?
  • If you have a failed adoption and claim the expenses for the federal adoption tax credit, can you then claim the expenses for a subsequent successful adoption?
  • What type of documentation do you need for a failed adoption or when the birthmother changed her mind?
  • Do you need to get an ATIN (Adoption Taxpayer Identification Number) for the child in a failed adoption?
  • Do you need to get a Social Security number for the child before applying for the adoption tax credit?
  • Is it necessary to adjust your withholding in order to make sure you qualify for adoption tax credit in 2011 or 2012?
  • Bruce: Some websites have used the statement that adoption expenses for adoptions initiated in 2011 and finalized before 12/31/12 will be considered refundable. I do not understand this interpretation since I thought the rule called for these expenses paid in 2011 to be deductible in 2012 (the year after they were paid) since the adoption would not be final until 2012. That being the case, wouldn’t they be subject to the 2012 rules and thus, not refundable?
  • Children adopt from some countries, such as Ukraine, must maintain dual citizenship until they turn 18. Does dual citizenship affect qualifying for the adoption tax credit? Does an adopted child’s citizenship affect receiving the tax credit?
  • If the cost of the adoption (agency fees) is over the credit amount limit and you have other expenses like travel and food, should you include all of the receipts associated with the adoption or just the one for the actual adoption. So, do you need to send in just enough to cover the tax credit or should you send in everything?
  • Should you send copies or original documents to support your claim for the adoption tax credit when filing in 2012 for your 2011 taxes?
  • For international adoptions, when is the adoption considered final for purposes of claiming the adoption tax credit? Court date? Day you received custody? Date on the adoption papers?