Adoption credit OK'd w/o child's ID#

[BP.]

Taxpayers had 2011 adoption expenses for a failed adoption. They had no SSN, ATIN or ITIN info for the child. They claimed their adoption expenses in 2012. I really wasn't sure what to tell them in terms of the credit being approved with no ID# info, but pleased to report that their credit was approved! Best of all, the couple conceived, and now have an infant.

[veritas]

Your client is fortunate

Taxpayers had 2011 adoption expenses for a failed adoption. They had no SSN, ATIN or ITIN info for the child. They claimed their adoption expenses in 2012. I really wasn't sure what to tell them in terms of the credit being approved with no ID# info, but pleased to report that their credit was approved! Best of all, the couple conceived, and now have an infant.

http://www.taxpayeradvocate.irs.gov/userfiles/file/Full-Report/Most-Serious-Problems-Adoption-Credit-Delays.pdf

[dkss]

Last year I amended two tax years for a client who had THREE failed adoptions. I STRONGLY cautioned them upfront about the rumored extra long delays and requests for the same info multiple times. I was also concerned because of the no SSN or ATIN issues. I attached all kinds of court docs to the returns.

Much to my surprise, this year when they came in, I asked about the amended returns and they said they received the refunds an a couple of months - no processing problems, no followup questions!!

[BP.]

http://www.taxpayeradvocate.irs.gov/...dit-Delays.pdf

What a very interesting link. Thank-you!

[veritas]

Your welcome

What a very interesting link. Thank-you!

Wouldn't it be nice if the IRS devoted as much energy to a much larger problem that being fraud or the child tax credit.

Makes you wonder why so much effort was spent on people doing something so noble for so little return.

[David1980]

Wouldn't it be nice if the IRS devoted as much energy to a much larger problem that being fraud or the child tax credit.

Makes you wonder why so much effort was spent on people doing something so noble for so little return.

I'm not sure the IRS documentation for the adoption credit really was "for so little return". I know what the TA says, but I think the question isn't how much fraud was attempted but rather how much fraud would have been attempted without those documentation requirements. The kind of preparer that likes using fraud to boost refunds is usually looking for fast and easy. With the adoption credit it wasn't fast because it had to be filed on paper and it wasn't easy because rather than just putting some numbers on a form they'd have to forge the adoption documentation. I think the fraud rate would have been very high had the IRS not had those requirements. Think of all the fraud with the FTHBC the first year. Amazing how that went down so much when the IRS started requiring documentation up front.

As far as child tax credit fraud they have done some. Certifying Acceptance Agents can no longer get new ITINs issued by claiming they saw the proper documentation. It used to be you could become a CAA and then fill out bogus W-7 for kids that may or may not have existed to get ITINs which then got the taxpayer refundable child tax credit. TIGTA reported the issues and now everyone has to send documentation to the IRS to get the ITIN. I can't help but wonder how many ITINs were issued to kids that don't exist before the change though. The IRS also added the physical presence test questions on the 8812, but I don't really think that will do much. Too easy to mark yes regardless, especially if you were the sort of preparer that filled bogus W-7.

What really needs to happen I think is congress needs to eliminate refundable tax credits. I'm not against providing help to the less fortunate, I just don't think it belongs on an income tax return refund.

[veritas]

Last numbers I heard was

I'm not sure the IRS documentation for the adoption credit really was "for so little return". I know what the TA says, but I think the question isn't how much fraud was attempted but rather how much fraud would have been attempted without those documentation requirements. The kind of preparer that likes using fraud to boost refunds is usually looking for fast and easy. With the adoption credit it wasn't fast because it had to be filed on paper and it wasn't easy because rather than just putting some numbers on a form they'd have to forge the adoption documentation. I think the fraud rate would have been very high had the IRS not had those requirements. Think of all the fraud with the FTHBC the first year. Amazing how that went down so much when the IRS started requiring documentation up front.

As far as child tax credit fraud they have done some. Certifying Acceptance Agents can no longer get new ITINs issued by claiming they saw the proper documentation. It used to be you could become a CAA and then fill out bogus W-7 for kids that may or may not have existed to get ITINs which then got the taxpayer refundable child tax credit. TIGTA reported the issues and now everyone has to send documentation to the IRS to get the ITIN. I can't help but wonder how many ITINs were issued to kids that don't exist before the change though. The IRS also added the physical presence test questions on the 8812, but I don't really think that will do much. Too easy to mark yes regardless, especially if you were the sort of preparer that filled bogus W-7.

What really needs to happen I think is congress needs to eliminate refundable tax credits. I'm not against providing help to the less fortunate, I just don't think it belongs on an income tax return refund.

5 billion in child tax credit fraud. In 2011 the IRS reported a possible undetected 5.2 billion in identity theft fraud.

Could it be that the adoption credit was mostly availed by conservative individuals and so they were targeted?

I agree on eliminating all refundable credits.