The Internal Revenue Service needs to do more to raise awareness of the adoption tax credit and plans to conduct more outreach, according to a new government report, especially now that the new tax law includes a $5,000 refundable credit.
The report, released Monday by the Government Accountability Office, found the IRS’s messages about the adoption tax credit haven’t been clear or consistent enough, and the IRS hasn’t been doing enough to reach out to key adoption stakeholders, such as state adoption agencies, with the relevant information. Confusion about eligibility for the credit could mean that taxpayers are not getting the full benefit, the GAO pointed out.
Back in 2011, in a previous report, the GAO recommended the IRS should include relevant adoption stakeholders and clarify its documentation requirements for the credit. The GAO also reported at the time that the IRS audited a high percentage of returns that claimed the credit. In 2012, in response to the GAO’s recommendation, the IRS took some steps to improve its adoption tax credit communications strategy. However, the IRS doesn’t currently have a comprehensive educational outreach plan to engage with adoption stakeholders and provide clear, consistent information to taxpayers.
The GAO found the percentage of returns claiming the adoption credit were generally audited at the same rate as all individual tax returns for tax years 2012 through 2021. However, among adoption credits audited during this time, 41% were adjusted by the IRS. The average increase to the credit was around $6,000 and the average decrease was approximately $7,000. IRS officials could not easily provide an explanation for these changes.
The IRS has been facing turmoil this year amid budget and staffing cutbacks, however, and the departure on Friday of the IRS’s sixth leader since January.
In the report, the GAO recommended the IRS should develop an educational outreach plan to help ensure people know about the credit and can claim it appropriately. With new changes to the adoption tax credit enacted last month in the new tax law, the GAO believes the IRS has a unique opportunity to help taxpayers benefit from this credit with an outreach plan.
“Such a plan is particularly important in light of changes to the credit that were enacted in July 2025,” said the report. “Improved education and guidance, along with more engagement with adoption stakeholders — such as the Department of Health and Human Services’ Administration for Children and Families — could help taxpayers avoid costly mistakes in either failing to claim the credit or doing so inappropriately. Improved understanding of the credit could also save IRS resources by reducing the need for expensive audits.”
The IRS agreed with the GAO’s recommendations. “We recognize the value of GAO’s recommendations and are committed to evolving our outreach strategy accordingly,” wrote Edward Killen, acting chief tax compliance officer at the IRS, in response to the report. “The passage of the One Big Beautiful Act, which introduces a $5,000 refundable adoption tax credit, significantly amplifies the need for more expensive and inclusive educational efforts.”
The maximum adoption tax credit amount is also set to increase this year to $17,280 per child for adoptions finalized in 2025, up from $16,810 in 2024.
