Texas residents who have adopted children in the last year may find themselves targeted by IRS audits if the tax agency treats such filers as it did in 2012. According to the Taxpayer Advocate Service, a branch of the Internal Revenue Service, the IRS flagged approximately 90 percent of taxpayers who claimed a tax credit for adoption. The IRS launched partial or full audits against nearly 70 percent of all adoptive families in the U.S.
In its report, the Taxpayer Advocate Service accused the IRS of failing to correct its seriously flawed procedures for dealing with adoptive families. The report alleges that this misstep has potentially caused financial harm to the thousands of Texas taxpayers who have taken in children in order to better their lives.
Although it filed audits against 35,000 adoptive families across the country, the IRS rejected only around 1.5 percent of all adoption credit claims. The Advocate Service says the agency’s policy also caused harm to itself, and by extension, to taxpayers as well. The IRS was forced to pay about $2.1 million interest for refunds held past the 45-day limit in 2011.
The Advocate Service says that taxpayers claiming certain refundable credits, like those introduced by the Patient Protection and Affordable Care Act, will likely continue to be targeted by audits until the IRS develops a better system for assessing and dealing with them. An official with the IRS defended its procedures, arguing that cautiously analyzing credit claims is essential in ensuring that they are accurate.
IRS audits can result in serious repercussions for those facing them. A taxpayer who lists incorrect information in his or her return can be subject to tax penalties, an audit fraud case, and an immense amount of stress and mental turmoil. Such individuals should contact a qualified attorney specializing in tax law to learn more about defending against these pitfalls.
Source: Fox News, “Nearly 70 percent of adoption credit claims were audited by IRS, report finds” Joshua Rhett Miller, May. 24, 2013