As many as 90% of families who claimed the adoption tax credit on their 2012 tax returns may have had their tax returns flagged for review, according to the IRS’s Taxpayer Advocate Service. Additionally, nearly 70% of these families may have received at least a partial audit of their tax returns. The majority of the cases where the IRS conducted an audit resulted in no changes to the individual or joint tax return.
USA Today quotes the IRS’s Taxpayer Advocate Service report as saying, “The IRS's misguided procedures, and its failure to adequately adjust these processes when it learned its approach was seriously flawed, have caused significant economic harm to thousands of families who are selflessly trying to improve the lives of vulnerable children…"
In 2010, the Patient Protection and Affordable Care Act changed the adoption tax credit. The changes were refundable, retroactive, and led some families to file amended tax returns for earlier years. An IRS spokesperson said that in the past, other refundable tax credits have led to fraud and that the agency was trying to prevent that this time.
Other possible tax issues associated with the Patient Protection and Affordable Care Act may still need to be worked out. For more information about these issues, we encourage you to read our FREE library article, “ Affordable Health Care and the IRS’ Role in Enforcement in Collection of the “Tax.”
Our Oklahoma City tax lawyers wish all adoptive families in Oklahoma, and across the nation, a quick and easy solution to any possible audits or tax problems arising from adoption tax credits.