Tax return options when Social Security numbers are delayed
Update for the 2021 Tax Year (returns filed in 2022): Recent changes to the Child Tax Credit supersede the guidance previously outlined below. Adoptive parents who are waiting on a social security number for their child should speak with a tax expert about filing an extension rather than filing with an ATIN, in order to be able to claim the Child Tax Credit. If you file with an ATIN, you cannot claim the CTC, and you cannot go back and amend the filing. Learn more in our interview with Becky Wilmoth, adoption tax expert.
Today was the extended deadline for filing federal 2019 taxes, and NCFA has learned in the last few days that many adoptive families experienced difficulty claiming their recently adopted child(ren) as a dependent and/or claiming the Adoption Tax Credit for which they are eligible due to processing delays caused by COVID-19. The reason? They were either waiting for a certified birth certificate from state officials or for the Social Security Administration to process their application for their child’s Social Security number. Both processes experienced delays as state and federal offices were closed, had reduced operating hours, or employees were unable to work due to concerns about employee safety. Under normal conditions, it takes approximately two weeks to receive a Social Security number if all required documentation is submitted at time of application; but many could not get the Certificate in time or the Card could not be issued in time for the tax return to be filed.
For many of these families, in the midst of already challenging economic times, it presents an additional financial hardship to file for an extension and delay their tax refund. So, NCFA spoke with two CPAs to ask if there are alternatives to providing a Social Security number to satisfy the Internal Revenue Service’s requirement for a personal identification number to claim an adopted child as a dependent and apply for the Adoption Tax Credit – and we learned that there are options! Although today is the deadline, we know that some adoptive families are deciding whether to apply for an extension, or have already received one and maybe facing future decisions about how to file their returns if they don’t yet have the appropriate documentation. In these situations, and in the future for other families, these tips can be helpful:
1. Apply for an ATIN number – According to the IRS, an ATIN “is an Adoption Taxpayer Identification Number issued by the Internal Revenue Service as a temporary taxpayer identification number for the child in a domestic adoption where the adopting taxpayers do not have and/or are unable to obtain the child's Social Security Number (SSN). The ATIN is to be used by the adopting taxpayers on their Federal Income Tax return to identify the child while final domestic adoption is pending.” An ATIN number can be used in both a finalized domestic and intercountry adoption. Answers to frequently asked questions regarding the use of an ATIN number can be found at IRS.gov.
2. Include personal documentation of having applied for a Social Security number – Although applying for an ATIN seems to us to be the best alternative, two CPAs verified that the IRS has allowed families to include written proof of having applied for a Social Security number, but only in filing paper returns. The taxpayer can write on paper “Social Security Number Applied FOR” and include a copy of the Social Security application with the return. If a refund is expected, the IRS will process it.
Waiting expectantly on birth certificates or Social Security cards to submit completed tax returns is not a new experience for adoptive families, but certainly, the current situation related to the pandemic is unprecedented. The ATIN option has not always been available but is a viable option now for many. Going forward and with timely planning, the ability to apply for an ATIN number will help many families move forward on schedule with filing their federal tax returns.
Learn more about the Adoption Tax Credit in Adoption Advocate No. 152.
NCFA staff are not accounting or tax professionals. This blog should not be considered accounting or tax preparation guidance. Please consult your tax advisor before making any final decisions.