Families who adopted orphans and claimed the adoption tax credit were, like conservative and pro-life groups, targeted by the Internal Revenue Service. In 2012, 90 percent of those families were asked to provide additional information and 69 percent of them were audited. There is no evidence, though, of widespread fraud with the adoption tax credit.
The targeting of adoptive families was first revealed in a 2012 report to Congress by the Taxpayer Advocate Service. According to its mission statement, the TAS is an independent organization within the IRS that helps "taxpayers resolve problems with the IRS and recommend changes that will prevent the problems."
The TAS report was brought to the attention of David French, a conservative author who has contributed to The Christian Post, after he noted on his Facebook page that he had been audited. David and his wife, Nancy French, are adoptive parents.
In light of the recent scandal over the IRS targeting conservative and pro-life groups, French wrote about the report in a Wednesday article for National Review Online.
"This audit wave got almost no media coverage, but what was the experience like for individual families? In a word, grueling. Huge document requests with short turnaround times were followed by lengthy IRS delays in processing, all with no understanding for the unique documentation challenges of international adoption," French wrote.
The TAS report notes that there were $668.1 million in adoption tax credit claims in 2012, but the mass audits of adoptive families only recouped $11 million, or 1.5 percent. Meanwhile, the IRS had to pay out an additional $2.1 million in interest for the delays in refunds it caused.
Ironically, the adoption tax credit was designed by Congress to make it easier for families to adopt a child, but the IRS made those adoptive families' lives more difficult. The report also notes that many of these adoptive families were middle income, or lower middle income, families for whom audits are particularly challenging.
The report states, "The IRS's misguided procedures, and its failure to adequately adjust these processes when it learned its approach was seriously flawed, have caused significant economic harm to thousands of families who are selflessly trying to improve the lives of vulnerable children."
French also wrote about the particular challenges of the audit on top of the challenges unique to adopting a child.
"As an adoptive family," French wrote, "it's sometimes difficult to describe the immense challenges in gathering paperwork, opening your lives to social workers for home studies, then expensive travel to sometimes-corrupt foreign locales to then launch a new life with a child you love immensely but who is also experiencing his or her own culture shock and adjustment. All of this places a great strain on family finances and emotions. To then face an audit on the other side? All so the IRS can collect a whopping 1 percent additional revenue? It's beyond the pale. If the IRS is concerned about fraud, it can audit random samples, not the vast majority of adoptive families claiming the credit."