US Adoption Tax Credit is Permanently Extended UPDATED

In addition to passing North Korea Refugee Adoption act and finding time to condemn Russia for its ban on US adoptions, the Adoption Tax Credit was permanently extended. From  House Approves the American Taxpayer Relief Act of 2012  by William Perez  : “The adoption credit is permanently  extended. The credit is worth up to $10,000 (indexed for  inflation).”

There are a few guesstimations floating around for the actual amount. We will publish the decided-upon amount when that is established.

You can read our views on the line-the-adoption-industry’s-pockets adoption tax credit in our other two posts on the subject here.

REFORM Puzzle Piece

Update: Christian Post claims that adoptive parents were targeted by the IRS because 90% of adoptive parents had to provide additional documentation and 69% were audited.

“The TAS report notes that there were $668.1 million in adoption tax credit claims in 2012, but the mass audits of adoptive families only recouped $11 million, or 1.5 percent. Meanwhile, the IRS had to pay out an additional $2.1 million in interest for the delays in refunds it caused. ”

IRS Targeted Adoptive Families Over Tax Credit; Little Evidence of Fraud Found

[Christian Post 5/23/13 by Napp Nazworth]

Gee whiz, maybe the audits had something to do with what adoption agencies tell their clients, like the defunct Frank Adoption Center telling its clients who never completed an international adoption to go ahead and file for the tax credit. See our post here.

Update 2:“U.S. Rep. Bill Huizenga this week joined 34 colleagues in urging the Internal Revenue Service to investigate whether adoptive families were improperly targeted by the agency last year.

In a letter dated Monday, June 17, Huizenga and his cosignatories implore the agency’s top brass to review the findings of a recent Taxpayer Advocate Service report that 69 percent of those who applied for the federal adoption tax credit were audited.

Huizenga related that finding to the IRS’ widely publicized targeting of conservative, liberal and other groups seeking tax-exempt status.

His letter was cosigned by the likes of Reps. Michele Bachmann, R-Minn., Peter King, R-N.Y., and fellow Michigan lawmakers Kerry Bentivolio, Dan Benishek and Tim Walberg.

“Right now the federal government, especially the IRS, is suffering from a trust deficit,” Huizenga said in a statement. “A full examination of the auditing practices of the IRS relative to the adoption child tax credit is warranted.”

The Taxpayer Advocate Service is an independent arm of the IRS that works on behalf of taxpayers. Its 2012 report, published in May, found adoptive families were overwhelmingly audited.

With nearly 70 percent of families who claimed the adoption tax credit that year, only 1.5 percent were found to have improperly applied it, the report found.

That phenomenon likely was rooted, media reports have since noted, in the fact that recent changes to how much families may claim led to the IRS’ heightened scrutiny.

Provisions of the Affordable Care Act, also known as “Obamacare,” boosted the adoption credit’s maximum to just shy of $13,200, according to USA Today.

Tax experts and adoption advocates told the newspaper the IRS likely audited families because the credit can boost a tax refund by thousands of dollars.

“Yes, they had to wait,” an Illinois-based tax preparer told USA Today last month. “But you are also talking about a lot of money.””

Huizenga questions if IRS targeted adoptive families after reported audits

[MLive 6/18/13 byZane McMillin]

Compare the $13,200 adoption tax credit to the “5 biggest tax credits you might get .” See The 5 Biggest Tax Credits You Might Qualify For .

There is the Earned Income Tax Credit. Then the American Opportunity Tax Credit which is up to $2,500. Then the Lifetime Learning Credit which is up to $2,000.Then the Child and Dependent Care Credit which is up to 35% of qualifying expenses.The Savers Tax Credit which can be up to $2,000 for joint filer.

The Adoption Tax Credit far exceeds any other credit. That means the potential for fraud is higher too.