Adoption audits: gathering receipts

Due to recent adoption tax credit changes, lots of families this tax season have been asked to provide the IRS with documentation of costs they paid for adoptions in the last several years. We’re in that boat too. I spent several hours the other day sorting papers and found zero receipts for our 2007 adoption.  Yikes. With literally thousands of dollars at stake, I’d sure like to prove what we spent on our last adoption. What to do?

My first glimmer of hope came when I remembered that we’d bought plane tickets with the credit card.  I got thinking: businesses are required to do more record-keeping than this busy mama. Maybe they’d be able to help us out. Here’s what I ended up doing:

–called our credit card company and requested the 4 most likely months of statements from 2007.
–emailed our adoption agency asking for a letter detailing what we’d paid them for the adoption of the two girls.
–emailed our homestudy agency asking for the amount we’d paid for our homestudy and the requred post-placement.
–emailed our travel agent asking for a statement of what we’ve paid for plane tickets.
–looked through our our old check register for checks written for adoption purposes.
–called the bank requesting scans of those specific checks.

Within 48 hours, here’s what I had:
— plane ticket costs from our travel agent ($12,000)
— adoption fee costs from our adoption agency ($10,000)
— a promise of statements to be mailed from the credit card company
— copies of checks written for fingerprints, passports, dossier shipping ($400)
— a promise of information from our homestudy agency (that should be about $2000 more…)

I’m still trying to figure out how to get a receipt for the I600A, which I think was probably in the range of $400 or so. I may just walk in at our local immigration office and ask for them to print a receipt. But this is the government , so I’m not holding my breath I’ll have success. In any case, we’re already within a couple thousand dollars of substantiating what we claimed. Documentation from our homestudy agency will prove the rest of what we claimed.

Questions I still have:
–How do we claim food expenses and lodging in Ethiopia without receipts?
–How to claim what we paid the U.S. Embassy in Ethiopia without receipts?

I’ve wondered if the IRS would accept a conservative guess on food costs without any receipts– obviously we had to eat while we were in Ethiopia. But I’m not sure. Thankfully on taxes we claimed LESS than we actually paid for the whole adoption, so we don’t really have the burden of claiming every single item now. But if anyone has additional insight regarding any of this, I’d love to hear them and I am sure other readers would as well.

{ 36 Comments }

  1. Mary,

    I don’t have any answers for you. Hopefully between the credit cards and the homestudy agency you will have plenty of documentation. I just wanted to say I’m praying for all of us adoptive families that are trying to get these refunds. Our adoption was special needs so we don’t have to provide receipts. We will hopefully be starting another adoption when we get this refund so I will remember to keep those receipts.

    • Adopted 5 children in the past few years and had an adoption carry over credit. Filed my taxes on February 15, 2011 and only received a review first and passed it the got audited. To top it all off the State Audited my child care credit. Now let me ask you, do you think haven 5 exceptional needs clidren carry no exspences. The IRS sucks. Good luck all, PS still received nadda and it is June 17, 2011.

  2. I am confused. We completed an adoption in 2008 and claimed the adoption tax credit in the two years following. Have I missed something? Are we supposed to be doing this as well?

    • Tamara, If you claimed all of your adoption credit already in past years, this won’t affect you. This is only for people who have carryover credit and/or who completed an adoption in the last year, and stand to get all remaining adoption credit back for the 2010 tax year. I’m not sure if ALL adoptive families are getting audited. But in casual talk with friends, I am getting the idea that most families with carryover credit are being asked for additional info from the IRS this year.

      • Mary,
        We are in this boat. We have been informed that our return is “under review.” We are waiting to hear what, if anything, they want from us. In the meantime, we are stressing about paying back money we borrowed to complete the adoption. The letter we got said we had to wait 45 days from the date of the letter to even contact them if we don’t hear something. The letter, received on Friday, was actually dated today.

        I have all our records from our daughter’s adoption (the carry over refund we have due to us) but I just want them to tell me what they want. Sheesh!

        • We filed on February 15 and did not received the letter telling us we were be “reviewed” until the very end of March and we received the letter telling us what they needed on April 8th. We felt like we waited forever just to know what to provide and where to send it to and now we cannot inquire for another 45 days!! Just thought another timeline might help in knowing what to expect.

          • p.s. I do know several people who had carry over amounts who actually got their refund with no issues. I also know several who finalized in 2010 that also got their refund without any issues either, so the rest of us, just got the short straw or the amount of our refund is larger, who knows? It will be interesting to see how this all resolves. If they didn’t want to make good on this refund then they shouldn’t have offered it.

  3. Did you use an ATM in Ethiopia? Or maybe withdraw money from your credit card while you were there? Would that count as a receipt for expenses you made while you were there? (Of course, you probably thought of this as well..)

  4. We paid by check for our I600A, so maybe you did too? Then you could just request a cancelled check from your bank.

    Our food and lodging was at our adoption agency’s guest house, so that was easy to get a receipt for, but everything else we spent in country I have no idea how to prove!

  5. The tax credit is less than that, so you don’t need to have more receipts than the amount they will refund you, right?

    • Well, our most recent adoption was for 2 kids, so we are eligible for double the credit of $13,000ish (I forget what the exact amount is). I think we only claimed $24,000 or so.

    • Colleen says:

      When I called the IRS they told me that I had to send in all of my adoption receipts not just the minimum amount that I could claim on my taxes. I have a huge spreadsheet now in date order with all the receipts. Thank goodness I took a lot of good notes on many of those receipts. I had to get a lot of cancelled check copies from my bank too. Some receipts are on that thermal paper which after 4 years doesn’t photocopy very well.

  6. My best idea for in-coutry expenses would be ATM/credit receipts (if you exchanged money electronically via those methods for the best exchange rate)…But then I wondered, does food count? Presumably you’d have had to pay something for food/groceries for meals those days if you were at home, not adopting, as well, and it may well have cost less. The issue doesn’t affect me, and it may be spelled out somewhere in what’s claimable, but that was just an idle curiosity.

    If you have/can find adoption FAQ’s/materials from an agency that give an idea of in-country expenses, you may be able to use that?

  7. You should only need receipts to total the tax credit amount for each child. Once your receipts total that amount, forget about the rest because you won’t be getting any more money! After adding airfare and agency fees you should pretty much have it covered.

  8. Joe from Stow says:

    After proving that you traveled to Ethiopia for those dates, the government will probably let you use a PER DIEM for the food and lodging expenses.

  9. laura h. says:

    Boy sounds like a person needs to be working with a tax preparer who does nothing but handles adoption tax questions. Are there any such people?
    Any thoughts on the possibility, and where would the general public find it if it becomes a reality, a book that answered the many questions posed here?

    • Our tax preparer told us that this sudden desire to audit everyone for adoption tax credit stems from the IRS not having the money to refund!!! So, they are trying to cut corners wherever they can. We discovered that they processed us on our returns in 2008 as married filing separately, even though we filed jointly….by doing this, they didn’t owe us as much money. We have a nice return coming our way this year, and we are praying that all the documentation we sent it satisfies them.

  10. We’re in the same boat. For our international adoption, we had agency costs covered with receipts, as it was in late 2008. But with our domestic adoption in Jan 2007, we were not sure what to do. Thankfully, in domestic adoption situations, the courts often require an affadavit of expenses, and we had our file-stamped copy with eldest’s adoption documents. We’ll see if that’s a go or not…

  11. Just started my adoption adventure recently, hopefully the benefits stay as a deduction instead of switching back to a credit when the current bill expires. If it doesn’t our child will most likely not have any siblings since we can’t fund a larger house,currently two bedrooms no way to add an addition, and the cost of a second adoption with just the credit.

  12. Our adoptions were foster to adopt so we don’t have to have receipts!!!! But, we do have to provide proof that the adoptions were special needs. We faxed our decree once but it was not received. Imagine that! They gave us 2 fax numbers to try this time. When we do finally get the refund, we will be debt free except for our mortgage, with leftovers.

  13. Mary, thanks for the tips! We completed David’s adoption in China last year and we are being audited (or “examined”, the new IRS euphemism). And given the crazy year we’ve had, I can’t seem to put my hands on the receipts quickly (not to mention, our son’s cleft lip surgery is this week, so I’m a little preoccupied). We’ve done this 3 other times with no problems – why are we suddenly being “examined”? 🙁 Fortunately, between what our agency and travel agent can provide us with, we should be well enough over the $13K, because most of our in-country receipts are in Chinese – there’s really no way of telling WHAT they’re for!

    • We’re being audited this year because the IRS is lacking in funds to do refunds! That is what our tax preparer told us, and I believe her.

  14. We were audited in 2005 for our 2002 foreign adoption of our 3 kids. I must be a bit of a pack rat because I had a whole stack of misc. receipts from food and other purchases in country. Three years later though, they were very faded and in a foreign currency and language that we could barely understand. We did our best to make sense of them and include the currency exchange amount from that year but it wasn’t 100% accurate I’m sure. I think the IRS is most concerned that you can account for the larger amounts (airfare, fees, etc.) and I seem to remember something about an allowed per diem amount also. Thankfully, they didn’t question anything we sent into them and sent us a letter saying that we satisfied their “curiosity” well enough and that was the end of it.
    Old emails between the agencies from that time period might have some information about amounts that you needed to pay or paid too.

  15. Chelle T says:

    Just got a partial refund. They gave us the $$ not related to our China adoption that was finalized in 2010. I checked the IRS website for refund status and got this message:
    We have received your tax return and it is being reviewed. You will receive a notice from us requesting additional information from you. When you receive the notice, please provide the requested information within 30 days. You may not receive all or a part of your refund until we receive and review the information we requested from you. If you need more information after you receive our notice, call the number on the notice.

    • That’s the exact notice we and another family in our travel group received, and the letter came soon after. We also received our entire refund minus the adoption credit. This is pretty widespread, and is not limited to special needs or carryovers from a past year.

  16. We are also being examined. Any ideas on what paperwork might be accepted to show the special needs part of the adoption. We did a foster/adopt and I remember them telling us that all adoptions coming out of the foster care system were “special needs” cases. In addition to this, our son has medical “special needs”. Do you think it is better to inundate them with medical records or keep it limited to the special needs assessment that was done to determine our child’s special needs AAP?

  17. No fabulous insight, but we feel your pain. The IRS deposited a nice $1200 and requested receipts for the rest. Thankfully, Mr Perfect had everything but the plane tickets, and that was easily managed with copies of our credit card statement.

    This is a good lesson for those home educators who want vouchers. If you want the money, you’re going to have to give them what they want. Adoption receipts – no problem. Input in my academic choices for my children? No. Way.

  18. We are also experiencing the same issue. We had a carryover credit from our 2008 adoption and we are now being required to submit all of our receipts to the IRS. This is so frustrating as we are also counting on the refund to pay off our one of our last remaining loans.

  19. L Madre says:

    The IRS is examining EVERY adoption credit claimed in 2010. Seriously, call and ask. The IRS states that they have to do it at the request of congress.

    • Colleen says:

      Yeah, probably because the US treasury doesn’t have the money and they probably don’t want to have to pay out the adoption credit $ that they dangled in front of us. Seems like so many big corporations have tax loopholes that get them out of having to pay hundreds of thousands in many cases, and here we are just trying to get our small amounts. Pardon, my frustration with all this tedious receipt collecting. A lot of well-meaning people said to me when I went through the adoption process that, “Once you have your child, you’ll forget about all the paperwork and things you had to do to adopt .” Well, now we get to relive all of it.

  20. Angry dad says:

    Every adoptive parent I know that adopted in 2010 is being audited. I know 6 and all 6 are in the same boat. So let me understand this, the losers in DC what to win humanitarian bonus points for “Caring” about adopted kids but then slam every parent who adopted with hassles, expenses and even legal and accounting costs. It would be pretty simple to just get copies of I600a and a decree and trust us.

    Adoption is not easy as we know and very rewarding and VERY expensive, I really wish that all americans simply vote away this hypocrisy come 2012 , DC is full of it and should be ashamed of themselves.

  21. I am in the same boat, two separate adoptions within 9 months of each other,2007, and 2008. I cannot find any receipts for the restaurants we at at while there, just from the grocery store, which do not amount to much at all. Can I claim per diem food expenses or not, I cannot find anything that says yea or nay, and I am beyond frustrated.

    • Not sure if you can claim per diem food costs…we didn’t itemize ours quite that closely. BTW, we just got our full refund a week ago, so for those of you waiting, there is hope!
      Mary

      • Mary-I am still waiting for my refund-they said 8-10 weeks. Its over 8 but not 10 weeks yet. How many weeks did it take you once you mailed it to them? Thanks!

        • We submitted taxes initially in early March, got the letter asking for extra documentation in early April, and had all the paperwork submitted to them by late April. We got our money in mid-July.