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  #1  
Old 03-21-2011, 10:17 AM
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mamachell mamachell is offline
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CA tax credit help

Hello All,

(also posted in general form)

I'm sure this has probably been covered but I'm a little confused about the tax filing. I adopted my daughter last year and I'm looking into the tax credit. Since we adopted from foster care there really wasn't any expense besides court fees which were already reimbursed. So, can I still claim a tax credit? I also see that we can claim the entire amount if our child is "special needs". What type of document would then need? I read this must be an official state determination. My daughter did receive some speech therapy but wasn't determined special needs for the Federal Subsidy we receive monthy. I'm in CA if it helps.

Thank you
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  #2  
Old 03-21-2011, 10:28 AM
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DannieAS DannieAS is offline
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Quote:
Originally Posted by mamachell
Hello All,

(also posted in general form)

I'm sure this has probably been covered but I'm a little confused about the tax filing. I adopted my daughter last year and I'm looking into the tax credit. Since we adopted from foster care there really wasn't any expense besides court fees which were already reimbursed. So, can I still claim a tax credit? I also see that we can claim the entire amount if our child is "special needs". What type of document would then need? I read this must be an official state determination. My daughter did receive some speech therapy but wasn't determined special needs for the Federal Subsidy we receive monthy. I'm in CA if it helps.

Thank you

adoption placement signing...I made copies of the paperwork, I also made a copy of her monthly subsidy check....I'm hoping I did that right....but yes according to our post-adoption meeting I went to, we can claim the whole tax credit.
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I was a crazy single mom by choice to:

L (aka Tigger)

Now, I'm forging the journey of newlywed and adjusting to parenting with another person in the mix

I blog every now and then at http://dannieas.blogspot.com


"We are told to forgive and forget ... But I couldn't forgive and I couldn't forget ... Then I realized .. I have a right to remember and I leave the forgiving to a higher being."~ Unknown
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  #3  
Old 03-21-2011, 10:56 AM
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mamachell mamachell is offline
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Hi DannieAS,

I just looked this up on the NACAC website so it seems that minority status is considered a special need. Just wondering: did you file taxes yourself or through a CPA or firm? I'm thinking I may need some help.

Also, anyone in the Los Angeles area with a good taxman/woman who knows about this, please send a referal.

Thanks,
Michelle

Federal Adoption Tax Credit for Special Needs
Adoptions Finalized in 2007
Beginning in tax year 2003, families adopting a child with special needs from foster care were
allowed access to the adoption tax credit without needing to document expenses. For tax year
2007, the tax credit is $11,390 per child and you have this year and up to the next five
additional years in which to use it. If you finalized your adoption before 2007 and failed to
claim the adoption tax credit, read our other fact sheet Amending Your Tax Return.
Accessing the Tax Credit
How do I know if my child is cons idered to have special needs according to the
IRS?
Children that are hard to place for adoption such as older children; minority children; sibling
groups; and children with medical conditions, or physical, mental, and emotional handicaps
often are determined to have special needs.
NACAC interprets the instructions for Form 8839 (the Adoption Tax Credit form) this way: If
you receive adoption subsidy (assistance) for your child, the state that provides the subsidy has
determined that your child has special needs. Your adoption subsidy agreement (or application
and agreement) is the evidence that the state has determined your child to have special needs.
If your child does not receive an adoption subsidy, NACAC believes the state has not
determined that your child has special needs and you will not be able to take the credit without
documenting expenses for the cost of the adoption.
The instructions, found at Instructions for Form 8839 (2010) state:
Column (d)
A child is a child with special needs if all three of the following statements are true.
1. The child was a citizen or resident of the United States or its possessions at the time
the adoption process began.
2. A state (including the District of Columbia) has determined that the child cannot or
should not be returned to his or her parents' home.
3. The state has determined that the child will not be adopted unless assistance is
provided to the adoptive parents. Factors used by states to make this determination
include:
a. The child's ethnic background and age,
*If you can claim the child tax credit (see IRS publication 972) or other credits, you should claim them.
b. Whether the child is a member of a minority or sibling group, and
c. Whether the child has a medical condition or a physical, mental, or
emotional handicap.
You may be able to claim a credit or exclusion for the adoption of a child with special needs
even if you did not have any qualified expenses. See line 24 and the instructions for line 5.
If you check the box in column (d), indicating the child has special needs, be sure to keep
evidence of the state's determination in your records.
What will the federal Adoption Tax Credit mean for our family?
While every family’s taxes are different, we can provide information to help you figure out what
the credit means for you. How much, if any of the credit you can use is based on: (1) your
income (families with federal adjusted gross income above $210,820 cannot claim the credit at
all); and (2) your total federal tax liability. In one year, you can use as much of the credit as the
full amount of your federal income tax liability. The amount of your tax liability (line 46 of
Form 1040) is based on your taxable income.
Many people believe the Federal Adoption Tax Credit won't help them because they get a
refund every year, but that isn't necessarily true. A refund means you have paid more federal
income tax than you needed to, so the IRS refunds the amount overpaid. The tax credit is
applied against your total tax liability and could increase your refund. Here are some examples
of how the tax credit might benefit your family.
• Family one is a couple who adopts a sibling group of two children with special needs.
They had $6,500 in federal income tax withheld from their paychecks, and their tax liability
is $7,000, which means they would owe $500 in April. With the adoption tax credit, they
have $22,780 in credits, and this year they could use up to $7,000 of the credit.* They get a
refund of $6,500, and will have at least $15,780 of tax credit to carryover for up to five
additional years.
• Family two is a single mother who adopts a sibling group of three children with special
needs. She had $5,000 in federal income tax withheld from her paychecks, but her tax
liability is only $4,000, which means she would receive a refund of $1,000 in April. With
the adoption tax credit, she has $34,170 in adoption tax credits, and this year she could use
$4,000 of the credit.* She will get a refund this year of $5,000, and can carry over $30,170
of tax credit to carryover for up to five additional years.
• Family three is a couple with five other children who adopts a sibling group of two
children with special needs. They had $1,000 in federal income tax withheld from their
paychecks, and their tax liability is $0, which means they would receive a refund of $1,000
in April. With the adoption tax credit, they have $22,780 in credits. Since they have no tax
liability, they are unable to use any of the possible $22,780 adoption tax credit this year.
They should still claim the tax credit on their tax return because it must be claimed in the
year the adoption was finalized. The credit would carry forward for five additional years and
would go into effect if their tax liability is greater than zero in those future years.
Filling out Form 8839: Qualified Adoption Expenses
What do I do when the IRS asks for qualifying expenses on line 5?
The Instructions for Form 8839 found at:
Instructions for Form 8839 (2010) state:
Special needs adoption. If you adopted a child with special needs and the adoption
became final in 2007, enter $11,390 on line 5, even if your qualified adoption expenses
were less than $11,390 (and even if you did not have any qualified adoption expenses).
This means that you do NOT have to document qualified expenses to take the credit if your
child is considered special needs or hard to place and receive adoption subsidy.
What if my tax liability is les s than $11,390?
Then you will also need to fill out the Credit Carryforward Worksheet in the Instructions for
Form 8839. This documents the amount of the credit you can carry forward for up to five
additional years or until it is used up, whichever is sooner. You do not need to submit this
worksheet.
Claiming the Child Tax Credit
If you can claim your child as a dependent, then you should also look into how to claim the
Child Tax Credit. In years that you are using the Adoption Tax Credit and the Child Tax Credit,
you will need to use the worksheet in Publication 972, Child Tax Credit.
Note—if you checked Yes on line 13 of the worksheet you may be eligible to take
the Additional Child Tax Credit. The Additional Child Tax Credit is a refundable
tax credit, which means you may receive more money in a refund than your total
tax liability (unlike the Adoption Tax Credit). To claim this credit, you will need
to complete Form 8812, Additional Child Tax.
Additional Questions
Finally, if you receive adoption subsidy (assistance) for your child and have questions on
whether it is taxable income or if you can claim that child as a dependent (and receive the child
tax credit), you should read our fact sheet, which can be found at:
NACAC | Adoption Subsidy.
If you have additional questions on the adoption tax credit, contact the North American
Council on Adoptable Children at 651-644-3036 or adoption.assistance@nacac.org.
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  #4  
Old 03-21-2011, 12:02 PM
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DannieAS DannieAS is offline
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Turbo Tax via my dad

I found out at our post-adoption meeting from a person who has a "tax man" that 99% of people (CPA, tax people) don't even know how to do the adoption tax either.

I just did mine so we'll see if it was fine or not.

ETA: it was told to us that if we receive a monthly subsidy, the child was considered special needs.
__________________
I was a crazy single mom by choice to:

L (aka Tigger)

Now, I'm forging the journey of newlywed and adjusting to parenting with another person in the mix

I blog every now and then at http://dannieas.blogspot.com


"We are told to forgive and forget ... But I couldn't forgive and I couldn't forget ... Then I realized .. I have a right to remember and I leave the forgiving to a higher being."~ Unknown
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  #5  
Old 03-21-2011, 12:22 PM
Longing2bMom Longing2bMom is offline
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I use to work for a very well respected accounting firm and asked them if I could claim the credit for Baby A. They originally told me "no" because I had no expenses and she wasn't special needs. After reading some things on my own, I began to suspect they were wrong and asked them if they could look into it further. They did and discovered that I could claim the entire credit because the State of California classifies virtually all children adopted from foster care as "special needs" based on "adverse parental background". One easy way to tell is if you get an adoption assistance subsidy. This means your child is classified as "special needs". For Baby A, I sent in copies of her adoption decree and adoption assistance agreement and I received the refund last week.
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My fost/adopt journey:

05/04/09 - Attended fost/adopt orientation
06/30/09 - 08/25/09 - Attended fost/adopt classes
12/04/09 - Officially licensed (finally!!)

BABY A
12/22/09 - Baby A is born!
12/23/09 - Meet Baby A in hospital - Fall INSTANTLY in love!
12/24/09 - Baby A comes home!
01/21/10 - Judges orders no reunification services for birthparents, sets TPR hearing for March 25, 2010
03/25/10 - TPR granted!
05/24/10 - Appeals period ended with NO appeals!
07/06/10 - Finalized!

BABY M
9/22/10 - Meet Baby M (6 months old)
9/25/10 - Baby M comes home!
12/10/10 - TPR granted!
12/28/10 - Appeal filed
3/2/11 - Appeals court refuses to hear appeal
4/27/11 - Finalized!

Last edited by Longing2bMom : 03-21-2011 at 12:24 PM.
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  #6  
Old 03-29-2011, 09:55 PM
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DannieAS DannieAS is offline
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Quote:
Originally Posted by Longing2bMom
I use to work for a very well respected accounting firm and asked them if I could claim the credit for Baby A. They originally told me "no" because I had no expenses and she wasn't special needs. After reading some things on my own, I began to suspect they were wrong and asked them if they could look into it further. They did and discovered that I could claim the entire credit because the State of California classifies virtually all children adopted from foster care as "special needs" based on "adverse parental background". One easy way to tell is if you get an adoption assistance subsidy. This means your child is classified as "special needs". For Baby A, I sent in copies of her adoption decree and adoption assistance agreement and I received the refund last week.

Longing2bemom....what "adoption assistance agreement" did you have? just curious as all I have was my foster placement papers, my papers at the adoption signing, but there's nothing there with subsidy agreement just that we went over all of L's info and that I received her packet of hx. as of now I have the adoption order/decree and I made copies of my AAP checks and the medical card....my AW is out on maternity leave....anyways should be sending the packet out this week....if you have any ideas let me know....even the foster placement has marked "no special needs" (as in cognitive and physical)
__________________
I was a crazy single mom by choice to:

L (aka Tigger)

Now, I'm forging the journey of newlywed and adjusting to parenting with another person in the mix

I blog every now and then at http://dannieas.blogspot.com


"We are told to forgive and forget ... But I couldn't forgive and I couldn't forget ... Then I realized .. I have a right to remember and I leave the forgiving to a higher being."~ Unknown
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  #7  
Old 03-30-2011, 12:38 AM
Longing2bMom Longing2bMom is offline
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It's a one page document that I had to sign that states how much assistance she gets per month and that she will continue to receive Medi-Cal. It has checkboxes to check the reason why the child is receiving assistance and my social worker checked the box for "Adverse Parental Background". I call it an Adoption Assistance Agreement, but I'm not sure if that is the official name for the form.
__________________
My fost/adopt journey:

05/04/09 - Attended fost/adopt orientation
06/30/09 - 08/25/09 - Attended fost/adopt classes
12/04/09 - Officially licensed (finally!!)

BABY A
12/22/09 - Baby A is born!
12/23/09 - Meet Baby A in hospital - Fall INSTANTLY in love!
12/24/09 - Baby A comes home!
01/21/10 - Judges orders no reunification services for birthparents, sets TPR hearing for March 25, 2010
03/25/10 - TPR granted!
05/24/10 - Appeals period ended with NO appeals!
07/06/10 - Finalized!

BABY M
9/22/10 - Meet Baby M (6 months old)
9/25/10 - Baby M comes home!
12/10/10 - TPR granted!
12/28/10 - Appeal filed
3/2/11 - Appeals court refuses to hear appeal
4/27/11 - Finalized!

Last edited by Longing2bMom : 03-30-2011 at 12:49 AM.
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  #8  
Old 03-30-2011, 06:50 AM
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DannieAS DannieAS is offline
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hmmmm i remember checking the boxes....but the sw took those with her and I got the history packet for L and then later the adoption decree.

my AAP came immediately though and so did the medical card.
__________________
I was a crazy single mom by choice to:

L (aka Tigger)

Now, I'm forging the journey of newlywed and adjusting to parenting with another person in the mix

I blog every now and then at http://dannieas.blogspot.com


"We are told to forgive and forget ... But I couldn't forgive and I couldn't forget ... Then I realized .. I have a right to remember and I leave the forgiving to a higher being."~ Unknown
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  #9  
Old 03-30-2011, 08:43 AM
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Same here. I called my AW and told her that I didn't have the AAP paperwork. She mailed me copies of it. Just call your AW.
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  #10  
Old 06-22-2011, 12:44 PM
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mamachell mamachell is offline
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Just an update -- my tax forms came back with a request for more information (basically they didn't get me my refund). I am going to send them a copy of my adoption agreement but it doesn't give any reason why I'm getting it. I'll also include a letter of explanation. I'll let you know if that works.
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  #11  
Old 06-23-2011, 06:38 AM
Bellesmama Bellesmama is offline
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If she's not considered special needs by the state standards then you can't claim it. That's the only way you can claim through foster care.
All you would need though for others reading is the adoption decree.
For CA I believe special needs (not physical and mental) for this purpose is 3 years and older, part of a sibling group, and race.
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Old 06-23-2011, 02:30 PM
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Quote:
Originally Posted by Bellesmama
If she's not considered special needs by the state standards then you can't claim it. That's the only way you can claim through foster care.
All you would need though for others reading is the adoption decree.
For CA I believe special needs (not physical and mental) for this purpose is 3 years and older, part of a sibling group, and race.

All children in Ca Foster Care are considered special needs. It falls under Adverse Parental Background. I had a newborn placed with me. He was healthy, mother did no drugs or alcohol. He has blond hair and blue eyes. When he was 16 months old the secondary SW came to my home to talk about adoption. (They were not sure if he would be RU at that time) She talked to me about the adoption subsidy, and I told her I didn't think he would qualify. He was a perfectly healthy little boy. That is when she told me that all children in foster care in CA are considered Special Needs and will get a subsidy. They qualify under Adverse Parental Background. I was shocked. I think CA is the only state that all qualifies all foster children as special needs.
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