Additional Child Tax Credit and Adoption Cred

[cmwhitman2785]

I filed my 2022 tax returned and claimed Adoption Tax Credit as well as the Child Tax Credit.  While inputting my information Turbo Tax said I qualified for ATC.  I have 5 dependents, so my total Child Tax Credit is $10,000.  MY overall tax liability is $10,776.   Turbotax listed my CTC as $2,500 and used my adoption credit to zero out my tax liability.  The remaining $7,500 of the CTC was allocated under ACTC so it can be refundable.   IRS is now changing my CTC to $10,000 and limiting my adoption credit to the remaining portion of my tax liability of $776.  IRS is saying Turbotax is wrong on how it allocated a portion of my CTC under ACTC so I could receive more back.   Is this correct?  

[KrisD15]

I think TurboTax is correct. 

Since the Adoption Credit is Non-Refundable, that credit should be applied BEFORE a refundable credit such as the Additional Child Tax Credit. 

The IRS also instructs that the Adoption Credit should be applied before the Child Tax Credit. 

According to the IRS:

• Form 8839, Qualified Adoption Expenses
• Schedule R, Credit for the Elderly or the Disabled
• Form 8910, Alternative Motor Vehicle Credit
• Form 8936, Qualified Plug-In Electric Motor Vehicle Credit
• Form 8396, Mortgage Interest Credit
• Form 8859, Carryforward of the District of Columbia First-Time Homebuyer Credit
• Form 8834, Qualified Electric Vehicle Credit
• Form 8912, Credit to Holders of Tax Credit Bonds

Note:* CTC and ODC should be applied to tax only after the nonrefundable credit that appear before these credits on the tax return or appropriate schedule. This is done to help the taxpayer maximize their amount of credit.

1. These nonrefundable credits are:

• Subtracted from the tax amount.
• Limited to the amount of the tax liability subject to any applicable limitation based on the amount of tax under IRC 26 or IRC 38(c).
• Used before refundable credits.

IRS Source 

[cmwhitman2785]

Fantastic!  Very helpful!  I will be using this to correct information to get the IRS to correct their revision! 

[AMurrWall]

I had a the same situation regarding Adoption Credit and Additional Child Tax Credit.  Just wondering if the IRS accepted your revision. Thanks.

[Yaglesbagels]

I had the same issue. Spoke to 3 different people last month and the specialist told me it was a known error with the computer and a fix should be implemented by mid June. Called yesterday and the representative and their manager was giving me the run around that the ctc gets applied first then adoption credit and in most cases they are correct. But I’ve been through form 8812 many times on the computer through a service and hand written to do math separately with the same conclusion. What should be done is that the non refundable portion of the ctc should be used first ($500 per child) then credit limit worksheet a and b are used to then apply the adoption credit (b is specific to adoption credit - it’s one of the qualifications needed to user worksheet b) and then the refundable portion of the actc is applied ($1500 per child). It’s clear in the documentation but I imagine many of the representatives are aware of this form to this level with this issue. This allows parents to maximize their credits. The rep is supposed to look at it with a specialist Monday and call me Tuesday. 

has anybody else had this issue or success?

[cmwhitman2785]

Update:  I called back in April and got the issue corrected with no problem.  Received the remaining balance a month ago!

[Yaglesbagels]

Can you share some details of the discussion with the rep? Mine was not helpful and kept telling me I was wrong with the ctc and adoption credits. She clearly was not informed of how the credits work.