While New York State, and several other states, have recently legalized LGBTQ marriage, the Federal Government still does not recognize these unions. This effects these couples in several ways, including taxes and applying for the Adoption Tax Credit.
According to a New York Times Blog post, because the federal government views these couples as “strangers in many spheres of their financial lives,” they may be at an advantage as it relates to the Adoption Tax Credit.
The blog post went on to say that “If you adopt your spouses child, you cannot claim the (adoption tax) credit. But since same-sex couples are not considered spouses under federal law, they are permitted to use the credit.”
Issues arose recently, according to the article, because several lesbian couples who applied for the adoption tax credit after adopting their spouses child, received letters from the I.R.S. claiming that their application had been denied.
Patricia Cain, who is a Professor at Santa Clara Law and an expert sexuality and federal tax law, said that the two main reasons the I.R.S. gave for denying these applications for the Adoption Tax Credit were that the “birth mother did not terminate her rights as part of the adoption… and the adoptive mother is the domestic partner of the birth mother.”
Cain said that both of these reasons are illegitimate. Regarding the first reason the I.R.S. gave, Cain said that a lesbian birth mother would not relinquish her parental rights when performing a “second parent adoption.” Cain also said that there is nothing in the “tax code that requires the termination of parental rights.”Cain explained in the blog post that the second reason the I.R.S. gave was incorrect because “there is nothing in the tax code that says domestic partners cannot claim the credit.”
According to the blog post, a Government Accountability Office Report on the I.R.S. claimed that the tax examiners were not properly trained in all aspects of the Adoption Tax Credit, which may explain why these couples were incorrectly denied their Adoption Tax Credit.
If you believe you were incorrectly denied your Adoption Tax Credit there are forms that you can fill out, and an appeals process to go through. Cain said in the blog post that ““Most taxpayers, after pushing back hard, have had the credit allowed.”
In the article, the IRS said that “any taxpayers who feel that they were improperly denied the credit should contact the I.R.S.”
There will be many changes to the Adoption Tax Credit in the 2012 financial year. To learn about all of these changes, please consider attending Adoption STAR’s Financial Planning for the Adoptive Parents Seminar on Tuesday, January 10.