[SadieAnn]

Go to www.irs.gov and look up Publication 968 "Tax Benefits for Adoption", there is one specifically for use in preparing 2004 returns.

Naturally there are still points that are confusing, but I found it quite helpful.

In domestic adoption you can the credit for a failed placement (which we had). As I understand it (disclaimer that I am a not tax expert HA!) you cannot exceed, per each adoption effort, the total amount of the credit which is $10,390. So if you spent $10,000 on a failed match, and then later you spent another $10,000 on a match that leads to a successful adoption, you could only claim $390 of the last $10,000 you paid out.

The publication has a table that outlines the year you can claim the expense vs the year you paid it.

For our failed placement we have filed form W-7 to obtain a temporary tax ID # (whether or not we get it is yet to be seen). However, Pub 968 does provide some direction if you have "no identifying number". I have not followed up on that yet but plan to investigate it.

I believe the year you claim and expense does depend on whether or not the adoption becomes final.

Also if you have any employer benefit for adoption that needs to be factored in.

Good luck to all!