Adoption Credit

[Kram BergGold]

Client had a $19,000 refund, $13,000 of which was a refundable adoption credit (I attached the proper documentation). IRS sent client a check for $6,000. What to do?

[Koss]

Pre-refund audit

That's exactly what happened to many, many clients that claimed the First Time Homebuyer Credit, including one client of mine.

I know it's not the same credit, so obviously the documentation requirements are different. But the process has got to be the same. Either they will take time to review it, and then issue the rest of the refund, or your client will get a letter requesting additional documentation.

In my client's case, the home purchase was a little out of the ordinary. It was a land contract, so there was no HUD closing statement. We attached a copy of the land contract, which had stamps on it showing that it had been filed at the county recorder's office.

She got her refund, without the homebuyer credit, within the normal time frame. She also got a letter that was a correspondence audit. They asked for things like utility bills and copy of her driver license, showing that she was actually living at the address in question. She sent it in, and a month or two later, she got the rest of the refund.

I think the IRS is conducting a correspondence audit on every one of those large adoption credits, because the potential for fraud is huge.

The National Taxpayer Advocate has been complaining for years that taxpayers get refund checks without an explanation, and that the explanation comes separately, and takes much longer. It hasn't changed. It still happens like this when they take part of the refund to offset child support or a delinquent student loan. The get a check for less than than the amount on the return, and then the letter comes separately a week or two later.

Just wait. Your client will get a correspondence audit. Or a letter that simply says they are conducting an examination, and will "contact you if we need additional information."

BMK

[BP.]

Client had a $19,000 refund, $13,000 of which was a refundable adoption credit (I attached the proper documentation). IRS sent client a check for $6,000. What to do?

Did you look up client's "Where's My Refund?" page at irs.gov? There may be a reference # & phone number # there for more info.