Jan 07 2009
It’s Tax Season!
Ok, another random post, then I’ll resume more about our process.
First, I just have to share some good news. You may have picked up in previous posts that we’re potty training. Kiddo went pee-pee in the potty at school today, and he went poop in the potty tonight before bed! That’s 2 times in one day! WOOHOO!!!! I’m so proud!!!!!
You have not lived until you’ve danced around the potty, clapping your hands and giving high fives. These were the most celebrated turds ever. 2 perfect little poops. I was tempted to keep them. These were not the first poops we’ve done on the potty, but this was the first time Kiddo said he had to go.
Ok, well that’s enough about poop.
If you’ve watched any amount of TV since January 1, you’ve no doubt been inundated by tax prep ads. New year means time to pay your dues for your income the previous year. Fortunately for many of us, this is a good time of year, cause it means REFUND!!!!!
I learned an important lesson several years ago. Once I acquired “complications” like interest from mortgages, loans, etc., I found it is well worth the money to take your taxes in and have them prepared. These guys are experts (in theory) and most credible places guarantee their work, so if you’re audited, they will represent and cover you should a problem arise. Having owed a large tax bill for a couple of years and getting to know the IRS way better than I would have liked, having someone else there to help me out really was peace of mind.
That being said, if you adopt or foster a child, you REALLY need to research the tax laws that are relevant to this. I learned another important lesson more recently about these big chain tax prep firms. The preparers are seasonal, likely not CPA’s, and only know about as much about tax law as they gain at the short training sessions they sleep through. You really need to be your own advocate.
Here is how we handled taxes once we started fostering, and eventually adopting. This was our interpretation of the law (which change frequently), and you SHOULD DEFINITELY CONSULT A TAX PROFESSIONAL to get to your own conclusion. We may have been completely wrong, and some IRS professional may read this and I may very well get slapped with an audit tomorrow. 
I’m takin’ one for the team, here. Gimme a little credit. If I can save you some money, think well of me when I need bail.
In most states, if you are fostering a child, you will get a small check from the DFACS office. The amount varies depending on the age and needs of the child. It’s meant to cover the child’s expenses, but it won’t even come close. In our case, it was about $350 a month. We spent more than that on diapers and formula. We could have enrolled in WIC or other federal aid to get this stuff at a discount, but this is a post for another day. Besides, we didn’t really need the money and certainly was not the reason we were doing this. I figured let them keep that assistance for people who really need it.
We DID NOT need to claim this as income. It was essentially a reimbursement. That’s the good news.
The grey area about fostering is whether or not you can claim the child as a dependent. We did. Our tax prep guy called in several of his coworkers, they sat down and reviewed the law together, and they let us make the claim. They were concerned because Kiddo’s social security # is how that is tracked. Kiddo was with his bio parents for about 45 days before they lost custody, so there was a possibility they might claim him, too. They weren’t sure what would happen if 2 separate filers claimed the same dependent. Obviously, it didn’t become a problem for us…yet.
The Feds passed a tax law a couple of years ago that allows for a very large tax credit for those who adopt. It’s about $11,000, which is a BIG deal. You really want to make sure you get that credit.
Our tax prep place was familiar with this law and was all set to work it into our tax package. However, it’s meant to be a credit back for expenses you accrue in the adoption process. For most domestic and foreign adoptions (remember the $30,000 price tag?), this allows you to claim part of those expenses, up to about $11,000. However, there is a VERY important clause on that law. If you adopt a child with SPECIAL NEEDS, you can claim the credit without the expenses.
Back up a sec…I should mention that total expenses for our adoption were about $184, from license to finalization. Talk about a bargin, huh!!! This is another perk to the DFACS foster-to-adopt program 
My employer offers an adoption reimbursement, up to about $3000, so I turned in these expenses to them for reimbursement. Basically, our adoption cost us nothing (as in zip, zero, nada). Because I had already been reimbursed, I couldn’t claim these on my taxes.
So when the nice tax lady (who had several friends who adopted kids from Russia) asked me for the receipts on our expenses, I got to gloat for a minute. “See this fantastic kid?? Yeah, we got to adopt him and it cost us NOTHING!” 
She started shaking her head. No expenses, no tax credit. Now I had read that law several times before even going in there, and I was about 80% positive we should get it. We went back and forth a little, she dug out her tax book, we looked the law over again, and moved on. I was PISSED.
So as she’s working, I read it again and again. I kept coming back to the “special needs” clause. When I asked our tax lady about the clause, she looks at Kiddo (who is perfectly happy and healthy), laughs, and goes back to working on our mortgage interest statement.
We walked out of the tax place completely ticked off. I knew that we could claim this, and had to find a way to prove it. We shared that sentiment with our preparer and the manager, and they assured us they would contact their corporate office for guidance, too. However, being tax season, I didn’t trust we would get a timely answer. A customer service rep did call us to say our case was being reviewed, but that meant nothing.
To qualify as special needs, there are 3 qualifications:
1.) The child must be a US citizen when the process began (an easy one).
2.) A state has determined the child cannot be returned to their bio home (also no problem)
3.) In order for the child to be adopted, some kind of subsidy is being provided by the state.
#3 was the stickler. We were no longer getting our monthly subsidy checks once the adoption was finalized. However, in the middle of the night, it dawned on me. Kiddo is on Medicaid till he’s 18 years old. This is subsidized for all kids adopted from the foster system in the state we lived (and yet another perk. Free adoption and free healthcare!). I dug out the documents we had to sign regarding this from DFACS, and right in that document there was a sentence that went something like “Medicaid is subsidized till age 18 to promote adoption.” It basically matched word for word the tax law, like it had been written to fulfill the requirement.
I took the afternoon off work, and marched right back into that tax office with all this documentation in hand. This info from the NACAC was also really helpful. Again they gather and powwow, consult some managers, and then agree that we qualify!!! YESSSSSSSSS!!!!!!!
We thought we had them beat and I sat back relieved. But my troubles weren’t over yet. Apparently this major tax chain has never encountered this before. They go to input and revise my return, and the SOFTWARE WON’T ACCEPT THE SPECIAL NEEDS CHANGE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ARRRGGGHHHH!
After I gave them a special little tongue lashing (my blood pressure was pretty much through the roof that whole week), they told me to come back the next day and they would have it corrected by then. 3 days later, they finally had it all handled. 6 weeks later, I had my down payment on my new house.
No matter how you go about adoption, keep track of your expenses and receipts and claim this credit!!! It was a HUGE difference in our refund (we’re talking thousands here), and it was well worth fighting for!!!
Oh, and sorry for all the poop talk. It’s the little things in life that make it all worthwhile!
