Monday, June 25, 2012

Moolah Monday - 2011 Tax Update

I'm not sure I ever told you the conclusion of our tax story.

That of course would be at least in part because it is not finished yet :(  I was reminded of this oh - so -small fact last week when yet another set of IRS notices came in.

Thankfully these IRS notices were really just that - harmless notices.  I will, however, note that it was interesting the IRS so generously included an envelope in case I wanted to send them money.  Really.

I don't owe the IRS.  As it stands now, they owe me.  They would argue that they don't owe me anything until their audit is done at which point they will determine either that we are even (their preference, I'm sure) or they owe me.  They would owe me something to the tune of $4000 - give or take.  I haven't actually done the math to figure out what is still outstanding.

Despite our concern and the frenzy my initial posts caused on the subject - we actually were able to claim our qualifying foster children in 2011 without a problem, once we received their social security numbers after much, much effort.  This was surprising.  I was sure I'd face a challenge over claiming them as I fully expected mom & dad to claim them, especially since they went home last October and finished the year reunified.  That was my only concern and so if that didn't pose a problem I didn't expect there to be a problem.

I was wrong.

At some point we received a notice in the mail saying that our funds were going to be held pending review.  It said we'd get resolution in 6-8 weeks - or something like that.

The next day about 60% of our tax refund posted to our account.  This made absolutely no sense.  The amount retained didn't equate to the amount for the fosters.  I couldn't figure out the logic.  Eventually over the next two months we found our account was under review for the following:

  • An ineligible dependent was claimed. (it didn't say which, but based on the amount could only have been one)
  • Our adoption assistance credit was under review
These two things were seemingly unrelated and in a way, are.  Adoption assistance credits require the submission of documentation including the signed adoption decree and proof of adoption fees subject to the credit.  In our case our attorney was proactive enough to get us an additional adoption decree with the county seal before we left the courthouse just for this purpose.  A copy of his invoice marked paid was enough to prove eligible expenses.  As directed in the instructions I sent all of the documentation through paper mail when I sent in my tax return documents.  

Apparently - the IRS system for this is completely inept.  When I called to inquire on the troubles I waited on hold forever, then whoever answered almost immediately sent me to one department (which made no sense, they agreed), and eventually I gave up.  The person I spoke with told me that they were the audit department and that though my file was ready to be audited (not the traditional audit - just reviewed for the adoption stuff), the best way for me to handle it would be to send in the documents again to the address he provided me in NJ.  I repeated that it wasn't that easy to just go get an additional copy of the signed adoption decree with the seal from the county on a sealed adoption.  He insisted I could just make a copy without the seal.  I told him the IRS documents said it had to have the original seal.  He insisted he's done this forever and you don't need the seal.  I stopped arguing with him.  I told him I already sent in the documentation.  Per the instructions.  He said that it went to a filing place in CA and his group is in NJ.  It would be faster for me (and they expected me) to send in the documents to NJ rather than have them wait for them from CA.  I was literally banging my phone against my forehead.  I gave up on that route.  

I then remembered I'd paid for the audit protection service from Turbo Tax.  I figured - might as well try it.

While I was waiting for all that to go through we learned the dependent that was ineligible was our daughter - Summer.  I submitted her as a dependent given her legal name (remember the adoption decree and name change was in the documentation I'd submitted) with her old SSN.  Of course, that was her SSN, but I hadn't changed her name with social security yet (nor gotten a new number...).  So, when they compared the SSN with the last name they did not get a match and automatically removed her from our eligible dependents.

So, we don't have her as a dependent - that's about $3500.  We don't have the adoption credit - that's about $1800.  That was the amount removed from our tax return.  Both of these, independently, should be able to fix.  We resubmit our taxes with her old name or with her new number.  No problem.  We resubmit the adoption documents for their review, no problem.

Except the two interact with each other.  When they removed Summer as an eligible dependent she, of course, was no longer eligible for the adoption tax credit, or at least we weren't able to claim that.  So if they reviewed the documents from the adoption they'd see that she wasn't an eligible dependent and nix it right there.  If they didn't review the adoption documents they'd have no reason to believe that Summer was the same person we'd submitted as an eligible dependent with a different name on the SSN.  They couldn't look at one independently, they had to look at them together.

Except the audit review only included the adoption tax credit, not the eligible dependent, so they couldn't discuss the ineligible dependent problem.

See how freaking frustrating it is.  The solution is clear - add her back as an eligible dependent and give us the adoption tax credit.  Done.  Seriously it should take all of 5 minutes to review the documents we sent to see the name change and the seal on the documents.  Except it's not that easy.  Of course.

So back in late March or April we responded, through the audit protection people, our response to the IRS that should correct everything.  They said it would be 8-12 weeks for a response.  Last week we got a response that said they're not done reviewing the file and need another 45 days. 

*eyes rolling*

Thankfully we're not in desperate need of the cash and I know eventually it will all work out.  I have the right number now and can ammend our return if all of this doesn't come back in our favor.  But I have to keep reminding mie why we haven't paid off the debt we'd planned to pay and why our account is lower than I thought it would be at this point.  We'd planned on having that additional money and it just hasn't come in yet. 

That's ok - it will in time.  And if I've learned anything about God and HIS timing I know that there is probably something coming that we couldn't have planned where we'll need that money and if we'd had it already it would have been spent on something He didn't intend for us to spend it on.  I wonder what that will be.

So that's that.  Nearly 5 months after I began talking to you about our taxes we still haven't seen resolution.  And it had nothing to do with #7 & #8.

4 comments:

Vertical Mom said...

UGH! HEAD--->DESK

Barb said...

One bright spot...from my own experience with having IRS pay a partial refund while checking out adoption expense claims (for months and multiple sets of paperwork), once the IRS determined my claim was correct, they paid in full plus interest. Good luck!

Mie said...

Plus interest huh? Hadn't thought of that. We'll see...

Penelope W said...

CPS was going to wait until adoption for the SS number and I demanded that Lil Bit have one before. I wanted to make sure that the IRS had a record of both names, instead of a Lil Bit W. coming out o thin air. Fortunately, our refund came quickly & now we have money for a small used car!!!