Message Board › Can Amended return by amended?
- This topic has 5 replies, 3 voices, and was last updated 5 days, 3 hours ago by Donna Treloar.
September 14, 2021 at 7:16 pm #314736Donna TreloarParticipant
Taxpayer took an adoption credit on a 2019 1040X for a child not yet adopted and had a limitation due to income levels being higher than allowed. He has sustained additional expenses in 2020 and 2021 when the adoption actually took place.
Apparently the 2019 income limitation results in a loss of those expenses for future years (no carryforward of unused credit). Can the original amended return be amended to disregard the credit or can the 2021 tax return indicate the new expenses incurred as if the credit had not been claimed in 2019 (income limit will not apply for 2021)?
September 15, 2021 at 5:44 am #314751Lynn FreerParticipant
You can amend an amended return once the original amendment is processed.
September 15, 2021 at 10:11 am #314763Mark BoleParticipant
“can the 2021 tax return indicate the new expenses incurred”
In general, yes. But prior expenses reduce the amount available for the current year credit.
“Can the original amended return be amended to disregard the credit”
No, not in the way you want it to.
You can’t ignore expenses properly attributable to a “closed” year as not applying to the overall expense limit upon which the credit is based.
See §23(a). Paragraph (1) says the credit shall be allowed (meaning it is not optional to forgo the credit in order to “save it up” for a subsequent year). Paragraph (2) specifies the “open” years for which expenses “shall be allowed“. (Basically, only either the prior year or the current year).
The word “shall” in the IRC is uniformly interpreted to mean the taxpayer does not have a choice, and if I understand correctly, the taxpayer is trying to make a choice to ignore the expenses that were properly attributable to the 2019 credit calculation. So, no.
See also §23(b), which specifies the dollar limit of aggregate qualified adoption expense. It does not matter whether or not a credit was actually claimed, so amending 2019 return will not change anything going forward.
ps. of course, also assuming this is not a foreign adoption or special needs adoption.
September 15, 2021 at 6:42 pm #314811Donna TreloarParticipant
If I report a “new” credit for 2021 with 2020 and 2021 expenses, do I mark question #3 on the Credit Form as no? Am I actually taking a “new” credit for expenses not previously claimed on the 2019 form?
September 16, 2021 at 8:51 am #314817Mark BoleParticipant
One thing you haven’t made clear yet is how much adoption expense was reported on the 2019 amended return, and how much additional are you hoping to further report in following years.
IMO, the form does not accurately reflect the law. So back to your original plan, if you mechanically follow the form instructions and make the amendment you propose, you can probably avoid listing the prior amount of qualified adoption expenses. But as I pointed out, §23(b) clearly states an aggregate limit of qualified expenses for a given adoption, regardless of whether or not a credit was claimed or allowed (e.g. because of the income limitation).
So I guess it comes down to an ethics question, follow the form or follow the law.
If someone else can come up with a different interpretation of the law, I’d love to read it.
September 16, 2021 at 9:39 am #314828Donna TreloarParticipant
Thanks Mark for so much information and thought. I do not know the amount of new expenses yet. I’m thinking if it in excess of amount allowed (which I believe it will be in total). I think I can just include expenses on the 2021 form that aggregate to the allowed total (less amounts already claimed). I will make sure that the total credit taken in both years does not exceed the allowable credit for a single adoption. That seems ethical to me!