Child Dependency Exemptions for Adopted Children
As we move through the last quarter of 2018 and approach the end of the tax year, many families begin to gather necessary information for tax filings. For adoptive parents, the process of claiming their adopted child as a dependent on their annual income tax returns can be somewhat confusing when the adoption occurs later in a tax year and certain information and documentation cannot be obtained prior to tax filing deadlines.
When children are adopted, their legal status as dependents and their change of name are completed the day of their adoption finalization hearing. Typically immediately following the adoption finalization hearing, the judge overseeing the hearing will execute an Adoption Decree and shortly thereafter, the County court office which is responsible for processing adoption paperwork will issue a Certificate of Adoption. Those documents evidence an adoptive child’s new name and identify their legal parents. That information should be sufficient to claim a child dependency exemption for an adopted child. However, additional details are required in order to actually take an appropriate child dependency exemption for an adopted child.
For example, depending on the age of the child that is being adopted, a social security number may not have been issued for that child. One cannot claim a child as an exemption without a corresponding social security number for that child. Fortunately, the IRS can issue an Adoption Taxpayer Identification Number (ATIN) for a child that has not received a social security number. The ATIN is a temporary social security number that is valid for two years and can be obtained by completing Form W-7A. It can often take up to eight weeks or more to receive an ATIN. As such, adoptive parents who wish to claim their adopted child as a dependent on their upcoming 2018 income tax filings should make application soon.
In some adoptions where a child was in the custody of a County Children and Youth Agency, the adoptive parents wish to change their adopted child’s originally issued social security number. That process is not difficult as a new social security number can be obtained through the local Social Security Office with the presentation of an Adoption Decree, Certificate of Adoption and new birth certificate. However, in Pennsylvania, obtaining a new birth certificate after a child has been adopted takes approximately four months. So, depending on when a child is adopted, they may not be able to receive a new birth certificate reflecting their new name in time to obtain a new social security number which matches that new name in order to be claimed as a dependent with their new name. Fortunately, in these situations, the dependency exemptions are not lost; however, adoptive parents must list their adopted child as a dependent on their income tax filings by using the child’s original name prior to the adoption and original social security number. In order to claim a child dependency exemption, the child’s name and social security number must match Social Security’s records.
In a perfect world, an adoption would take place early enough in the year that an application for a new birth certificate reflecting the child’s new name can be received and then the parents can take that new birth certificate with the other required documentation to the local Social Security Office and obtain a new social security number for their child. With a new name and new corresponding social security number, adoptive families can claim their adopted child using that information.
As always, it is important to consult with a tax professional regarding any questions you have particularly as they relate to securing an Adoption Taxpayer Identification Number or the proper way to claim a child dependency exemption on tax filings.