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Taxes after adoption

Families throughout the country have grown through the use of adoption. Adoptive parents must take many practical matters into consideration, from the logistics of school districts to the potential headaches that can come with tax filings.

Does adoption impact adoptive parents’ tax returns? The addition of a family member into one’s household will directly impact the adoptive parents’ tax obligations. For example, parents are generally able to claim the adopted child as a dependent on their tax returns. This requires the use of a taxpayer identifying number such as a social security number or adoption taxpayer identification number.

What about the adoption credit? The adoption credit is a tax benefit available to adoptive parents. Expenses that qualify for this benefit can include adoption fees, court costs and traveling expenses. The parents can take the credit during the tax year the expenses were paid.

This credit is nonrefundable. This means the taxpayer cannot get a tax refund if the refund is the result of the adoption credit. However, any remaining credit can be transferred to the next tax year and reduce future tax obligations.

What if I make a mistake and am contacted by the IRS? A failure to properly file taxes or provide the wrong information on tax forms can result in contact from the Internal Revenue Service (IRS). The IRS may make contact with a 531-T letter or notification of an impending audit.

It is important to take this correspondence seriously. An audit can result in additional tax obligations. It is wise to seek legal counsel to review this contact and provide representation. Your counsel can advocate for your interests, better ensuring you are not expected to cover unnecessary tax fees.

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