Zuba & Associates, P.C.

Adoption a red flag for IRS thanks to flaw in system

IRS tax audits are unwelcome to anyone. But for certain families in Illinois and elsewhere, sweeping audits were the norm for the 2012 fiscal year. The reason, apparently, is adoption: families who had adopted a child or children were unfairly targeted for audits this year thanks to what is being called a "misguided practice" within the Internal Revenue Service.

According to reports, 90 percent of families who applied for the adoption tax credit were flagged for "review" by the IRS this fiscal year. A further report suggests 70 percent of those suffered a partial audit -- if not more. Compared to the statistics for auditing across the board, in which only 1 percent of all returns are audited, these numbers are staggering. Considering the value of the tax credit to adopting families, they should not be afraid of taking advantage of the support afforded them.

The Adoption Tax Credit was approved by Congress in 1996 in the interest of increasing the popularity of adoption across America. The IRS claims the sweeping audits are necessary to ensure the credit is not being misappropriated by fraudulent individuals. However, its own results indicate the rash of audits were largely unsuccessful: only 1.5 percent of all Adoption Tax Credit claims were disallowed by the IRS this year.

Adoption can be a challenging process for families, as Illinois residents involved in adoption programs are keenly aware. However, systems like the Adoption Tax Credit are there to help make family life for an adoptive family easier and the transition smoother. Despite the apparent efforts of the IRS this fiscal year, that's just what these systems have done for thousands of families across the nation. In order to ensure that all possible benefits are being reaped, it can be helpful for prospective or existing adoptive families to seek out additional information about tax credits and other benefits that may be available for them and their children.

Source: Fox News, "Nearly 70 percent of adoption credit claims were audited by IRS, report finds," Joshua Rhett Miller, May 24, 2013

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