August 05, 2004

IRS Auditing 1,000 Adoptive Families

It has come to our attention that the IRS is auditing over 1,000 families who completed their adoption in 2002. These families are being randomly chosen so far as we can tell. We believe that these are 1,000 Intercountry Adoptions and not specific to those from Guatemala.

This is nothing for anyone to get fired up or angry about. In today’s day and age of e-filing where no physical documents are sent to the IRS and yet there is this relatively new $10,000 tax credit, it seems logical to me that the IRS would want to make sure the tax credit is not being abused.

The lesson here is to make sure that you get and save receipts for everything you paid during your adoption. If your agency tries not to give you receipts for everything, then be sure that you save copies of the bank checks and other things to prove that the payments were made.

The key items they are looking for in these audits are proof of age, proof of adoption (in a very detailed manner – Guatemalan documents, translations, and US documents), and receipts and/or canceled checks for all expenses claimed. In addition, they will likely request details on any employer reimbursements. One person being audited suspects that they may be looking to verify when adoption expenses were claimed compared to when the process was final, but that is just a guess but the auditors said they had no idea why so many investigations were being made. The IRS contact phone number that was given is 1-800-477-1291.

Posted by Kevin at August 5, 2004 08:09 PM

Well, we didn't complete our adoptions in 2002. We completed our adoptions in 2001, and took the remaining portion of our then $5000 adoption tax credit in 2002. We also were audited in the State of Ohio for 2001's adoption tax credit of $500.

Posted by: LauraP at August 6, 2004 09:36 AM

Thanks so much for the heads-up. We completed our adoption in '02 and (knock on wood) so far nothing from Uncle Sam.

Posted by: Cathy at August 6, 2004 01:11 PM

We were one of the unluckey ones to be audited. We sent all our paper work in with receipts, ss card, green card, passport, etc. etc. and then they sent us the $10,000 tax bill. The second letter stated that they wanted a letter from our employers and translated documents of the Guat. adoption.. we are still waiting for the response...

Posted by: Annette at August 20, 2004 12:39 PM

Annette, we have also been audited and are in the process of getting everything together. Best of luck to you and anyone else that gets stuck in IRS limbo.

Posted by: cheri at August 24, 2004 09:26 AM

We just got our "no change letter" from the IRS, basically saying that no changes will be made to our taxes after our audit. We submitted our evidence the 1st week of August & received this letter in the 1st week of October.
We had contacted our senators, and one of them responded with a lot of support and began an investigation on our behalf.
I would strongly urge anyone who received an audit letter to contact your senators and representative - they can work with you to be sure that the IRS does not overstep their bounds. Good luck.

Posted by: Kristin at October 12, 2004 04:44 PM