IRS Issues Automatic Refunds for Adoption Tax Credit Carryforwards
The IRS has begun automatic refunds for taxpayers with adoption tax credit carryforwards from 2020-2024. Here is what preparers should tell clients.
- Published
- 3 min read
- Tax year 2025
- IRS source: IRS has begun issuing automatic refunds to individuals who claimed Adoption Tax Credit carryforward from prior years
The IRS has started issuing refunds to taxpayers who benefited from an adoption tax credit carryforward from earlier years. The agency says it has already issued refunds to more than 50,000 taxpayers and expects the process for most eligible taxpayers to be complete by the end of the year. Clients do not need to file an amended return to receive the additional credit.
What changed
The Treasury Department clarified its interpretation of the Working Families Tax Cuts as they apply to the adoption tax credit. Under the new interpretation, for tax year 2025 only, adoption tax credit carryforwards from prior tax years (2020 through 2024) can increase the amount of the credit that is refundable in 2025. That increase is subject to the $5,000 per qualifying child limitation.
In plain terms, a client who still had unused adoption credit from an earlier year may see a larger refund on the 2025 return than the original filing showed. The IRS is making this change to the account itself, so the client does not have to start over with a new return.
Who is affected and when
The change applies to individuals who claimed an adoption tax credit carryforward from prior years. Timing depends on when the 2025 return was filed:
- Taxpayers who filed their 2025 return before April 15, 2026, will generally receive any applicable adjustment automatically.
- Taxpayers who filed under an extension, or whose accounts have identity theft indicators, freezes, dependency conflicts or other issues, will be reviewed later in 2026, after the return is processed or the account issue is resolved.
Refunds and adjustments began in late September and will continue until complete. Affected taxpayers generally do not need to take any action.
What the IRS will send
The IRS will adjust affected accounts and issue any resulting refunds. Taxpayers will receive a notice, generally within 30 days of the adjustment, that shows the amount and whether the adjustment became a refund or was applied toward another tax or non-tax debt.
Ask clients to read the notice carefully, compare it with their 2025 tax return, and keep it with their tax records. If the figures do not match what they expected, they should have the notice reviewed before they take any further step.
What to tell your clients
- Affected taxpayers generally do not need to file an amended return to receive this additional credit.
- Watch for the IRS notice, which generally arrives within 30 days of the adjustment.
- Check whether the refund was applied to another debt. The notice will say so.
- Keep the notice with the 2025 return and other tax records.
- Clients with an extension or an open account issue may not see the change until later in 2026.
Using the IRS Individual Online Account
The IRS encourages all taxpayers to create an IRS Individual Online Account. It lets taxpayers securely view their tax records, check refund status, view notices and make payments without calling or mailing the IRS. Clients who want to see their adjustment and notices in one place may find it useful.
This is an IRS administrative change for tax year 2025 only. For the most current details, visit IRS.gov/AdoptionCredit before advising a client on a specific account.
Informational only, based on the IRS source linked above; not tax or legal advice for a specific situation.