I.R.S. Denying Lesbians Legitimate Adoption Credit
New York Times
December 13, 2011
By TARA SIEGEL BERNARD
Since the federal government does not recognize same-sex marriage, such couples are viewed as strangers in many spheres of their financial lives. They need to file separate federal tax returns, for instance. And sometimes, that can come with certain advantages.
Take the adoption tax credit. If you adopt your spouse’s child, you cannot claim the credit. But since same-sex married couples are not considered spouses under federal law, they are permitted to use the credit — at least until their unions are recognized.
So when several lesbians seeking to adopt a partner’s child received letters from the Internal Revenue Service that said they could not use the credit, they couldn’t help but wonder: Is the government choosing to recognize our unions only when it’s to the government’s benefit?
As it turns out, the I.R.S. keeps close tabs on many refundable credits: The adoption credit is refundable in 2010 and 2011, which means that the credit reduces the amount of tax you owe, dollar for dollar. And if the amount of the credit exceeds your tax bill, you get to collect that extra cash. Because it’s such an enticing break, it’s also ripe for abuse.
As a result, the I.R.S. conducted more audits by mail last year, and required many couples — gay and heterosexual — to provide more documentation. (In fact, 68 percent of the nearly 100,000 returns on which taxpayers claimed the adoption credit were audited by mail, according to a report by the Government Accountability Office, which reviewed the I.R.S.’s strategy to ensure taxpayers were rightfully claiming the credit.)
But at least two of the reasons that the I.R.S. gave to the lesbians who it turned down were not rooted in the law, according to Patricia Cain, a professor at Santa Clara Law and an expert on sexuality and federal tax law, who blogged about the topic and has assisted some couples who were denied.
The most common explanation for the denial, she said, was that the birth mother did not terminate her rights as part of the adoption. And while it’s typical for many birth mothers to do so when her child is being adopted, that’s obviously not something a lesbian birth mom would do when her partner is simply performing a “second parent” adoption. Nor is there anything in the tax code that requires the termination of parental rights, Professor Cain said.
Another reason the I.R.S. provided for the denials: the adoptive mother is the domestic partner of the birth mother. But again, she said there is nothing in the tax code that says domestic partners cannot claim the credit. “Nobody thinks the adoption credit was created to help lesbian mothers,” Professor Cain said. “But they are certainly entitled to it as long as the clear meaning of the statute grants it to them.”
The report from the Government Accountability Office said that the I.R.S. didn’t adequately inform its tax examiners regarding certain aspects of the adoption credit. So you can argue that the I.R.S. probably didn’t give them specific instructions on how to handle adoptions with same-sex parents either. A spokesman for the I.R.S. said that they were aware of an isolated number of cases where they made a mistake, and that they corrected the errors after they were notified by the taxpayers. In a statement, the agency said that it regrets the inconvenience and that it has provided more training to the examiners on this issue.
The credit, which is for as much as $13,360 in 2011, can only be used once. So if two men, two women, or two other unmarried people adopt a nonbiological child, only one adoptive parent can claim the entire credit or they can split it.
If you or your partner receive any notices from the I.R.S. requiring more information during this coming tax season, send your response to the I.R.S. within the time period allotted. “Most taxpayers, after pushing back hard, have had the credit allowed,” Professor Cain added.
That is the result that Beth Jennings is hoping for. She said that her partner, Coleen Jennings, adopted her biological daughter, Hazel, in 2010, four months after she was born. A couple of months after filing her return, she received a letter from the I.R.S. stating that the adoption credit was under investigation.
After sending more documentation, her partner was denied the credit, a decision they are now appealing. And when they called the I.R.S., Ms. Jennings said the agent seemed confused about the reason for the denial, even though they provided all the required paperwork and went as far as having their lawyer sign an affadavit. “There is probably a place in the flow chart for the guy answering the phone, and it probably stopped or didn’t include this scenario,” Ms. Jennings said, referring to instructions on how to assist same-sex couples.
The I.R.S. said that any taxpayers who feel that they were improperly denied the credit should contact the I.R.S. And if you need more assistance, you can also contact advocacy organizations like the National Center for Lesbian Rights, which may be able to provide more guidance.
Have you or your partner (or spouse) encountered any problems with claiming this credit? If so, let us know in the comment section if and how you were able to resolve the issue.
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