Let’s Talk: Taxes Take 2

Last I wrote about taxes was when we found out that we qualified for the Adoption Tax Credit. For some reason I never truly read through the information and thought that it only applied to private adoption. Here is that post:

https://fosteringourhope.wordpress.com/2014/10/23/lets-talk-federal-adoption-tax-credit/

We use an awesome accountant who does voodoo magic on our taxes. He is very knowledgeable about the codes, etc. He did our taxes this year and we were surprised about the Adoption Tax Credit because, again, we didn’t read the whole thing. The tax credit for Adoption can only give credit to the taxes that you owe that year, they cannot refund money. So in all intents and purposes you will not get the full amount unless you owe a lot in taxes! Here is a good explanation:

http://www.nacac.org/taxcredit/taxcredit2015.html

How much you benefit from this tax credit depends largely on your tax liability for the year in question.

So there’s that info for those of you, like us, who never read the whole code or did not understand. We will still benefit about $5,000 from this tax credit, but that is about one sixth of the amount of money we were expecting from this tax credit!

Secondly, let’s talk about natural parents claiming their children on their taxes. When our accountant went to file our taxes, someone else had already claimed the children. Yes, we will be changing their social security numbers. But we did not receive their new birth certificates or have the other necessary documents ready to change their social security numbers prior to tax season. So rest assured we will have them changed for next year! Anyway, we could not e-file for either the Federal or State taxes because we are claiming the children as our dependents. I have read a lot into this and most of the documents that the IRS wants stems on physical custody and residency for the year in question. The children never lived with or were in physical custody of their natural parents the year that we accepted placement and adopted them. I am hopeful that this fact alone will discredit their dependency claim and allow us to claim them on our taxes. It is also very possible that the IRS will not allow us to claim them on our taxes because they did not live with us for more than half of the year. But then any child born after June in 2014 wouldn’t be claimed by their parents because they didn’t live with them for more than half of the year. I am so interested to see how this plays out!

We are filing our taxes through the mail with a disclaimer and supporting documents to show why we are claiming them as dependents. I will let you all know how it goes!

Here are some of the links that I felt helped me in my research of the dependency tax laws. If we had only fostered the kids and not adopted them in 2014 then we would not be claiming them on our taxes.

IRS website:

http://www.irs.gov/taxtopics/tc654.html

Tax Laws for Claiming Dependents:

http://taxes.about.com/od/dependents/a/Dependents.htm

What Qualifies a Dependent:

http://taxes.about.com/od/dependents/a/Dependents_2.htm

IRS Audit for Dependents:

http://taxes.about.com/od/dependents/qt/Dependents-Audits.htm

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