IRS Faulted for Adoption Tax Credit Refund Delays

The Internal Revenue Service sent the majority of claims for the adoption tax credit to auditors this year because they lacked the necessary documentation, even though it had options that could have enabled it to reduce the number of costly correspondence audits and issue refunds to parents faster while still maintaining a robust enforcement strategy, according to a new report.

The report, released Monday by the Government Accountability Office, found that as of August 2011, 68 percent of the nearly 100,000 returns on which taxpayers claimed the adoption credit in the 2011 filing season were sent to a correspondence audit at the IRS. However, of the approximately 35,000 returns on which audits have been completed as of August, the IRS only assessed additional taxes approximately 17 percent of the time. The equivalent rate for all correspondence audits in 2010 was 86 percent.

According to IRS officials, data for audits completed through September 2011 showed that an adoption credit correspondence audit takes an average of 74 calendar days. The delayed refunds, according to adoption agency officials, can create difficulties for families expecting to cover the costs of an adoption with the refund.

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