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  #1  
Old 03-07-2011, 07:17 AM
Blazer406 Blazer406 is offline
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Income tax - failed adoption (2009) then pending adoption?

Hey guys (and gals),

I see alot of info on what to do for the adoption tax credit..... but nothing current on a failed adoption with a pending adoption.

We had a failed adoption back in '09. We took placement (different child) back in early '10, but the adoption cannot be finalized yet. (I'd rather not get into that )

With that said.... I read alot last year about the tax credit and learned I could not claim the failed adoption for TY '09.... when I filed in '10..... I had to wait til I filed in '11. I had anticipated finalizing in 2010 and being able to claim the failed adoption expenses and the current adoption expenses..... but alas.... we haven't finalized yet

Now we are in '11 and I am about to file for TY 2010..... and I think I can file from the failed adoption.... but since we haven't finalized our current adoption, we can't file anything yet for it.

Since our situation is fairly unique...... can anybody give me some insight to what I can and can't do for this filing? (I have procrastinated til now)

FWIW.... I had been doing our taxes using TurboTax and e-filing..... and now understand I can still do TurboTax but I have to make sure I fill out form 8839 and from what I read..... I should file via snail mail.....

Anybody can steer me in the right direction?
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  #2  
Old 03-07-2011, 09:43 AM
DianeS DianeS is offline
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For a DOMESTIC adoption, the IRS allows you to file either:
1- in the tax year in which the adoption became final.
-or-
2 - in the tax year AFTER the expense was paid.

So assuming your adoption is a domestic one, the expenses you paid in 2009 can be claimed on your 2010 taxes.

And the expenses you paid in 2010 can be claimed on your 2011 taxes.

You will need to attach a copy of your homestudy to the tax paperwork, to prove you have been working with an agency in order to accrue those expenses. On the lines where it asks for the child's name and SS number, put the agency name and contact information.

Make sure your tax software prints out the second page of the 8839, even if it's all zeros.

And you have to paper file, you can't e-file with the adoption paperwork.
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  #3  
Old 03-07-2011, 11:33 AM
Blazer406 Blazer406 is offline
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Quote:
Originally Posted by DianeS
For a DOMESTIC adoption, the IRS allows you to file either:
1- in the tax year in which the adoption became final.
-or-
2 - in the tax year AFTER the expense was paid.

So assuming your adoption is a domestic one, the expenses you paid in 2009 can be claimed on your 2010 taxes.

And the expenses you paid in 2010 can be claimed on your 2011 taxes.

You will need to attach a copy of your homestudy to the tax paperwork, to prove you have been working with an agency in order to accrue those expenses. On the lines where it asks for the child's name and SS number, put the agency name and contact information.

Make sure your tax software prints out the second page of the 8839, even if it's all zeros.

And you have to paper file, you can't e-file with the adoption paperwork.

So basically I'm still on target..... this tax year is the first year I can claim expenses from the failed adoption in '09..... and I can't claim expenses on the current adoption until it is final?
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  #4  
Old 03-07-2011, 12:27 PM
DianeS DianeS is offline
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According to the IRS, it doesn't matter that one was an attempt to adopt that utterly failed and the other is an attempt to adopt that is still pending. They don't care about that at all.

You can claim expenses in the year AFTER they were paid. Or in the year an adoption became final. That's it. That's all they care about.

So whatever you paid in 09 can be claimed on your 2010 taxes. Period. Regardless of which adoption attempt it was for. And your expenses paid in 2010 can be claimed on your 2011 taxes. Period. Regardless of which adoption attempt it was for.

If you finalize in 2011 then you don't have to wait to claim your 2011 expenses, you can claim them on your 2011 taxes right along with your 2010 expenses.

Hope that clears it up. It really does sort itself out nicely if you stop thinking about which adoption an expense was intended for and simply remember which year you paid it in.
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  #5  
Old 04-08-2011, 09:14 AM
Blazer406 Blazer406 is offline
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I have expenses paid at agency A in '09. Never got a match there in '09.

They got a referral through Agency B in which we were matched and paid expenses to in '09. This adoption failed with this baby.

So now I have expenses paid to two different agencies back in 2009.

Do I put both agencies on the 8839 paperwork where it asks for the childs name and SS #?
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  #6  
Old 04-08-2011, 11:53 AM
DianeS DianeS is offline
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Quote:
Originally Posted by Blazer406
So now I have expenses paid to two different agencies back in 2009.

Do I put both agencies on the 8839 paperwork where it asks for the childs name and SS #?

Yes, that's right.
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  #7  
Old 04-08-2011, 01:49 PM
Blazer406 Blazer406 is offline
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One last question....

A portion of the money that was sent to the adoption agency was a "gift" from a relative.

I suppose I am not supposed to claim I spent that towards my adoption expenses?

Thanks.

This forum is soo helpful..... and Thanks DianeS
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  #8  
Old 04-08-2011, 02:09 PM
DianeS DianeS is offline
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If they gave the money to you, then legally it is your money to do with as you wish.
If you then gave it to the agency, and the receipt for the money is in your name - then it IS allowable to claim that as money you spent and claim it against the adoption tax credit.

If it went directly from the relative to the agency, (and therefore the receipt is in your relative's name) then you can not claim it as your money for the adoption tax credit.

(You're welcome!)
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  #9  
Old 04-08-2011, 02:16 PM
gisellechloe gisellechloe is offline
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I don't mean to hijack the thread but I want to ask a similar question. I had a couple failed adoptions - the lagest was guatemala. I paid $25,000 (15 and then another 10) in 2008 to an agency that never got hague approved (and knew it when they stated the last 15 was due -uggh!) then as many know Guatemala closed and reopened. I never filed because although I have many beautiful photos/cd of "my" child it never came to fruition. Can I claim that this year? I never claimed anything because there wasn't an adoption. Does it matter that it was 2008? I did receive a foster placement in 2008 and adopted in 2009.
again sorry to the OP but you got me thinking, , ,

Last edited by gisellechloe : 04-08-2011 at 02:18 PM. Reason: keyboard sticking!
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  #10  
Old 04-08-2011, 02:19 PM
usisarah usisarah is offline
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Quote:
Originally Posted by gisellechloe
I don't mean to hijack the thread but I want to ask a similar question. I had a couple failed adoptions - the lagest was guatemala. I paid $25,000 (15 and then another 10) in 2008 to an agency that never got hague approved (and knew it when they stated the last 15 was due -uggh!) then as many know Guatemala closed and reopened. I never filed because although I have many beautiful photos/cd of "my" child it never came to fruition. Can I claim that this year? I never claimed anything because there wasn't an adoption. Does it matter that it was 2008? I did receive a foster placement in 2008 and adopted in 2009.
again sorry to the OP but you got me thinking, , ,

Diane may be able to answer your question more definitely, but I've been told that you cannot claim a credit for a failed adoption if it is an international adoption...at least that's how I understand that it works now. I don't know about back in 2008.
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  #11  
Old 04-08-2011, 02:23 PM
Blazer406 Blazer406 is offline
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Quote:
Originally Posted by DianeS
If they gave the money to you, then legally it is your money to do with as you wish.
If you then gave it to the agency, and the receipt for the money is in your name - then it IS allowable to claim that as money you spent and claim it against the adoption tax credit.

If it went directly from the relative to the agency, (and therefore the receipt is in your relative's name) then you can not claim it as your money for the adoption tax credit.

(You're welcome!)

On at least one occasion, the check was made out from the relatives account... and was signed by the relative and sent directly to the agency. So it looks like I am out of luck on that money.

One more thing....

As I understand it.... I can get the credit each year (up to whatever the max is for that particular year) and if I have spent more than the max..... it (the remaining balance) can carry over to next year?

That would be cool. I may have this confused.....
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  #12  
Old 04-08-2011, 02:38 PM
DianeS DianeS is offline
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Quote:
Originally Posted by gisellechloe
I don't mean to hijack the thread but I want to ask a similar question. I had a couple failed adoptions - the lagest was guatemala. I paid $25,000 (15 and then another 10) in 2008 to an agency that never got hague approved (and knew it when they stated the last 15 was due -uggh!) then as many know Guatemala closed and reopened. I never filed because although I have many beautiful photos/cd of "my" child it never came to fruition. Can I claim that this year? I never claimed anything because there wasn't an adoption. Does it matter that it was 2008? I did receive a foster placement in 2008 and adopted in 2009.
again sorry to the OP but you got me thinking, , ,

Expenses for an in international adoption can only be claimed when the adoption is finalized. I'm sorry to tell you that you cannot recoup your expenses for your Guatemalan adoption attempt at all, because it wasn't ever finalized.

You can claim the expenses for the foster child adoption, starting in the year AFTER the expense was paid, or in the year the adoption was finalized, whichever came first.
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  #13  
Old 04-08-2011, 02:46 PM
DianeS DianeS is offline
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Quote:
Originally Posted by Blazer406
As I understand it.... I can get the credit each year (up to whatever the max is for that particular year) and if I have spent more than the max..... it (the remaining balance) can carry over to next year?

That would be cool. I may have this confused.....

For your 2010 taxes, you are claiming the expenses you paid in 2009. You will claim EITHER the amount that you paid in that year, OR the maxium of the federal adoption tax credit for that year - whichever is SMALLER.

Example 1: If you paid $5,000 and the tax credit is $12,000 - you will claim $5,000. You are claiming the amount you paid in 2009, because it is the smaller of the two.
Example 2: If you paid $15,000 and the tax credit is $12,000, you will claim $12,000. You are claiming the total amount of the adoption tax credit, because it is the smaller of the two.

If example #1 applies to your situation, then you have remaining credit to use. On your 2011 taxes you can claim more expenses (those paid in 2010, and possibly those paid in 2011 if you finalize in 2011). You can keep claiming your expenses until you either run out of expenses or run out of credit.

But if example #2 applies to your situation, then you do not have any more credit that can be used. You have run out of the tax credit available to you. Even if you pay more money to complete the adoption, you can't claim any more against the adoption tax credit.

Make sense?
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  #14  
Old 04-08-2011, 02:59 PM
Blazer406 Blazer406 is offline
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Quote:
Originally Posted by DianeS
For your 2010 taxes, you are claiming the expenses you paid in 2009. You will claim EITHER the amount that you paid in that year, OR the maxium of the federal adoption tax credit for that year - whichever is SMALLER.

Example 1: If you paid $5,000 and the tax credit is $12,000 - you will claim $5,000. You are claiming the amount you paid in 2009, because it is the smaller of the two.
Example 2: If you paid $15,000 and the tax credit is $12,000, you will claim $12,000. You are claiming the total amount of the adoption tax credit, because it is the smaller of the two.

If example #1 applies to your situation, then you have remaining credit to use. On your 2011 taxes you can claim more expenses (those paid in 2010, and possibly those paid in 2011 if you finalize in 2011). You can keep claiming your expenses until you either run out of expenses or run out of credit.

But if example #2 applies to your situation, then you do not have any more credit that can be used. You have run out of the tax credit available to you. Even if you pay more money to complete the adoption, you can't claim any more against the adoption tax credit.

Make sense?

Yes... so if I had a magic wand and could control when I paid the expenses.... you would never "pay" more than the max allowable credit for that particular year..... then the adoption would in essence be free.... :-)

J/K ..... but wouldn't that be nice.
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  #15  
Old 04-08-2011, 03:11 PM
DianeS DianeS is offline
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Quote:
Originally Posted by Blazer406
Yes... so if I had a magic wand and could control when I paid the expenses.... you would never "pay" more than the max allowable credit for that particular year..... then the adoption would in essence be free.... :-)

J/K ..... but wouldn't that be nice.

I'm concerned that you may have misunderstood me... Once you max out the amount of credit available to you, you can't claim any more credit even if you have additional expenses in a different year. If you max out the amount of credit in 2010, and have finalization expenses in 2011, you're out of luck and can't claim the finalization expenses ever.

So the magic wand *I* would wish for is one that made adoption expenses more reasonable in general.
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