Instructions For Form 8839 - 2010 (Page 3 of 8) in pdf

Child who is a U.S. citizen or resident. If the eligible child

withholding or make estimated tax payments to avoid a

is a U.S. citizen or resident, you can take the adoption credit

penalty for underpayment of estimated tax.

or exclusion even if the adoption never became final. Take

Carryforward From Prior Years

the credit or exclusion as shown in the following tables.

(2005–2009)

IF you pay

From 1997 through 2009, the adoption credit had a 5-year

qualifying expenses in...

THEN take the credit in...

carryforward provision. Because the carryforwards are used

The year after the year

Any year before the year the

on a first-in, first-out basis, if you are claiming a carryforward

adoption becomes final

of the payment.

you must have a Form 8839 on file for all prior years for

which the carryforward was allowable.

The year the adoption becomes

The year the adoption

final

becomes final.

Amending prior year returns. If you did not previously file

Form 8839 for the same adoption (or adoption attempt) but

Any year after the year the adoption The year of the payment.

are claiming a credit carryforward in 2010, you must amend

becomes final

your prior year income tax returns and file Form 8839 for the

applicable years before you claim a credit carryforward in

IF your employer pays for

2010.

qualifying expenses under an

THEN take the

Amending prior year returns may have an effect on

adoption assistance program in... exclusion in....

other credits claimed in that year, including, but not

Any year

The year of the payment.

limited to, the child tax credit.

CAUTION

Example. In 2008, Naomi White adopted an eligible

Children with special needs. If you adopt a child with

child. Naomi’s allowable credit was $11,650 (the 2008 dollar

special needs you may be able to exclude up to $13,170

limitation), but Naomi had no tax liability for the year.

and claim a credit for an additional $13,170 (minus any

Because Naomi would have received no tax benefit from the

qualified adoption expenses claimed for the same child in a

credit, she did not file a 2008 Form 8839. Naomi also did not

prior year) even if you or your employer did not pay any

file a Form 8839 for 2009. For 2010, Naomi files a Form

qualified adoption expenses. See the instructions for line 1,

8839 in which she claims a carryforward from 2008. Before

column (d), on page 6 for more information.

Naomi’s 2010 Form 8839 can be processed, Naomi must

file amended returns for 2008 and 2009, attaching Forms

Foreign child. If the eligible child is not a U.S. citizen or

8839 for those years and showing the amount (if any) that

resident, you cannot take the adoption credit or exclusion

she could claim for those years.

unless the adoption becomes final. Take the credit or

exclusion as shown on the following tables.

Use Form 1040X, Amended Individual Income Tax

Return, if you are filing an amended income tax

TIP

return. Form 1040X and its instructions are available

IF you pay

at IRS.gov. You will also need the instructions (including

qualifying expenses in...

THEN take the credit in...

worksheets) for the return you are amending, along with that

Any year before the year the

The year the adoption

year’s Form 8839 and instructions. See the Instructions for

adoption becomes final

becomes final.

Form 1040X for details on how to obtain prior year forms

and instructions.

The year the adoption becomes

The year the adoption

final

becomes final.

Credit and income limitations. The credit and income

limitations that apply to a carryforward are based on the

Any year after the year the adoption The year of the payment.

limits in effect for the year the carryforward first arose, rather

becomes final

than the year or years in which the carryforward is claimed.

If you did not pay additional adoption expenses in a later

IF your employer pays for

year related to that adoption or adoption attempt, you cannot

qualifying expenses under an

THEN take the

increase your carryforward amount in a later year.

adoption assistance program in... exclusion in....

Example 1. Steve Thomas paid qualified adoption

Any year before the year the

The year the adoption

expenses in 2004, 2005, and 2006 in connection with the

adoption becomes final

becomes final.

adoption of an eligible child from another country. The

adoption became final in 2006. Under the rules applicable to

The year the adoption becomes

The year the adoption

foreign adoptions, the qualified adoption expenses are all

final

becomes final.

treated as if paid in 2006 and are all subject to the 2006

Any year after the year the adoption The year of the payment.

dollar and income limitations. The maximum tax credit in

becomes final

2006 was $10,960, and Steve’s income in 2006 was less

than the modified adjusted gross income (MAGI) phaseout.

Steve’s tax liability for 2006 was $7,500. Steve used $7,500

If your employer makes adoption assistance payments in

of his adoption credit to reduce his 2006 tax liability to zero

a year before the adoption of a foreign child is final, you

and carried forward the remaining $3,460. Steve paid no

must include the payments in your income in the year of the

additional adoption expenses in connection with the

payment. Then, on your return for the year the adoption

adoption in later years.

becomes final, you can make an adjustment to take the

Steve filed Forms 8839 for 2007, 2008, and 2009, but he

exclusion.

was unable to use any carryforward during those years. For

2010, Steve filed a Form 8839 seeking a refund of his

Your employer is not required to withhold income tax

unused carryforward. Even though the 2010 dollar limitation

on payments for qualifying expenses under an

on the credit is $13,170, Steve’s refundable credit for 2010

adoption assistance program. If you must include the

CAUTION

is $3,460 ($10,960 – $7,500).

payments in income in the year paid because your adoption

of a foreign child is not final, your withholding may not be

Example 2. The facts are the same as in Example 1,

enough to cover the tax on those payments. You may need

except that Steve Thomas sold a business in 2006, which

to give your employer a new Form W-4 to adjust your

resulted in his MAGI for the year being $210,000. The

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Instructions For Form 8839 - 2010 Page 3

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