Adoption Credit

[Jack from Ohio]

Client finalized adoption in 2005. Total of 5 dependent children and AGI of $60K. No tax for the adoption credit to offset.

2006-2009 form 8839 was not processed due to the same income/tax situation.

Carryforward expenses would have been $19K.

Pub says that years 2006 - 2009 can be amended to add form 8839 and bring the carryforward current. Now the question.

In the opinion of the experienced folks on this board, do you feel that the IRS will honor the amends for the prior years due to the large amount of carryforward?

I don't want to suggest this to my client till I am a bit more certain of this.

[kcjenkins]

Yes, Jack, although I am not sure you even need to amend, I would try just claiming the carryforward and include a worksheet showing the calculations from the original year and through each year to current.

[chadlonetree]

The instructions for 8839 say you must have a 8839 on file for previous years and you MUST amend all prior years that did not include 8839.

My question is, this goes back to 05-09 returns. They won't process 05-07 amends now will they? Are they making a special exception to the statute?

[kcjenkins]

OK, I should have read the instructions before I typed. You are correct, you do need to amend. But in this case I believe they will process those amendments, since their own instructions say to do it that way. Besides, processing them is just going to be a matter of adding the 8839s into the t/p files. Assuming you are not changing anything else, and your 'Explanation' on page 2 makes it clear that is why you are amending, it should not be a problem.

[mcb39]

I agree with KC. I also had an adoption in 2005 of three children. (special needs). The 8839 used up very little credit in each ensuing year. 2010, of course, would have been their final carryforward year. I, personally, would do all the amendments. All they really want is the carryover worksheet for the 8839. Since these have to be paper filed anyway, I would put everything in one envelope and mail it all to them. Do tell your clients not to hold their breaths as there seems to be some IRS snafu in processing these returns. It is nice that they changed the rules this year for those, like us, who would lose the credit after this year.. However, they did create a headache.

Even though I had filed 8839 each year, my credit had to be calculated on the allowed credit for 2005. I made up my own worksheet starting with the beginning credit and how much was deducted each year and the balance left. They had a little over $7000 left for 2010. So far they have not gotten their money, but there is no reason they shouldn't.

[jainen]

>>they will process those amendments, since their own instructions say to<<

Instructions aren't much authority, especially when they conflict with the tax code. It will be interesting to see if the IRS actually issues a refund based on amending a 2005 return in 2011.

[mcb39]

It will be interesting to see how and when the IRS works their way out of this entire Adoption chaos that they have created. They can't even find my clients' return even though she sent it certified. Wisconsin has it, but the IRS claims that they don't know where it is.