High Value Refund Checks for Adoption Tax Credit

June 25, 2011 by  Filed under: Taxes 

Checks for refunds from the IRS are some of the benefits that came with the Bush tax cuts that were introduced under the Economic Growth and Tax Relief Reconciliation Act of 2001. In that year, taxpayers received a refund check of $300.00 with head of households and married couples who filed jointly received $500.00 and $600.00 respectively. Since then, refundable credits increased in number and became something to look forward to. Today, a refund check has become the tax norm and taxpayers are always eagerly anticipating the much appreciated handouts by Uncle Sam. For the tax year of 2010, the average refund check for all taxpayers was at about $3,000.00.

Refundable Tax Credits

Refundable credits are credits that can award you a refund check (that is, if you have already paid off your outstanding tax liabilities and still have some credit in your balance). This is in contrast to the traditional or non-refundable tax credits, which can only be used against tax liabilities with no distribution of a refund check. Refundable tax credits include the Making Work Pay Credit, the Earned Income Tax Credit, the Adoption Tax Credit, and the First Time Homebuyer’s Credit.

The Adopted Children Credit

Out of all the refundable credits available, the Adoption Tax Credit is the credit that carries the highest value. Unlike the Making Work Pay Credit and the Earned Income Tax Credit that have a cap of $5,751.00, the Adoption Tax Credit has a cap of $13,170.00 per adopted child and therefore, a taxpayer who has adopted 5 children can claim a tax credit of a whopping $65,850.00. The high value of the tax credit has lead to high amounts of tax refund checks for people who qualify. A report from the Treasury Inspector for Tax Administration indicates that there were 72,656 taxpayers who claimed the adopted children credit in 2010 with a total value of $897 million.

Qualifying for the Adopted Children Credit

The Adoption Tax Credit was set to help individuals who adopted a child to recover a bit from the hefty expenses accrued when adopting a child. These expenses include adoption fees, court expenses for the adoption, attorney fees, traveling expenses, and other various expenses that are directly associated with the adoption process. On average, a private adoption can cost about $30,000.00, which is definitely not just another drop in the bucket. To claim the credit, you must have incurred the costs and have provided support documentation for it. However, for the adoption of children with special needs, you can claim the maximum amount of the credit, even without support documentation.

A Case in Point

The Ward family is a good example of some of the beneficiaries of the Adoption Tax Credit. The Wards have adopted 5 children with special needs in the past 3 years. They had incurred costs for the adoptions, but they could not receive any tangible funds from the credit, as it was not refundable. However, the tax code was changed for the 2010 tax year and the adopted children credit became a refundable tax credit. The outstanding credit that they had carried forward over the years was $54,000.00. They were now able to make a claim on the balance and are very excited and looking forward to their refund check of $54,000.00. For a family that makes an income of $39,000.00 a year, the tax refund will come in handy to cater for the extra costs of supporting their special-needs adopted children.

Refund Check Delays for the Adopted Children Credit

However, considering the high value of the tax refunds associated with the adoption credit, the IRS is taking more time to scrutinize the tax returns claiming this credit. As of June 2011, most of the taxpayers who had claimed the credit had yet to receive their tax refund checks. The IRS has acknowledged and apologized for the delay and attributes it to many errors and lack of support documentation from many tax returns by people claiming the credit. However, once the IRS is through with their vigilant review processes and distributes the refund checks, the Ward family will be happy to receive their immense $54,000.00 check.

Rob L Daniel and partners of Limon Whitaker & Morgan, for years have helped businesses and individuals Nationwide, with their delinquent IRS & State tax problems. The firm is based in Los Angeles, California USA. http://www.limonwhitaker.com / Tel:888.321.6188

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