IRS refunds have begun reaching more than 50,000 taxpayers after the agency changed how certain adoption tax credit carryforwards are treated for tax year 2025.
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Irs Refunds Update
The Internal Revenue Service said October 16, 2026, that it is automatically adjusting affected accounts and expects most IRS refunds to be processed by the end of 2026.
The adjustment follows a Treasury Department clarification involving the Working Families Tax Cuts and the refundable portion of the adoption tax credit.
Eligible taxpayers generally do not need to file an amended return solely to receive the additional credit or related IRS refunds.
Why the IRS is issuing new refunds
The adoption tax credit became partly refundable beginning with tax year 2025.
For 2025, up to $5,000 per qualifying child may be refundable, subject to the credit’s other limitations and the taxpayer’s eligibility.
When the 2025 tax rules were initially applied, certain prior-year adoption credit carryforwards were not included when calculating the refundable portion of the credit.
The IRS now says eligible carryforwards available for use in 2025 may increase the refundable adoption credit for that year, resulting in additional IRS refunds for some taxpayers.
This special treatment applies only to tax year 2025 under the current IRS guidance.
It does not create a general rule allowing every older adoption credit carryforward to become refundable in later years.
Which prior-year carryforwards may qualify
Unused adoption tax credits generally can be carried forward for up to five years.
For the 2025 adjustment, the IRS says carryforwards that originated in tax years 2020 through 2024 may be available for consideration.
Carryforwards from before 2020 have generally expired and cannot be claimed for this adjustment or used to support these IRS refunds.
The oldest available carryforward is generally used first when a taxpayer has unused adoption credits from more than one year.
The adjustment applies only when the taxpayer’s 2025 return and IRS account information show that an increase in the refundable credit can be determined administratively.
Not every person who claimed an adoption tax credit will receive an additional payment or IRS refunds.
Who may receive an automatic adjustment
The IRS says taxpayers who filed their 2025 federal return before April 15, 2026, will generally be considered automatically if their accounts contain the necessary information.
Taxpayers who already received the correct refundable adoption credit will not receive a second adjustment for the same issue.
A taxpayer also may not qualify if there is no eligible carryforward available for 2025 or if the IRS lacks enough information to calculate the change.
Some accounts require additional review before the IRS can complete the adjustment or issue IRS refunds.
Those situations may include returns filed under an extension, identity-theft indicators, account freezes, dependency conflicts or other unresolved processing issues.
The IRS says those taxpayers may be reviewed later in 2026 after the return is processed or the account problem is resolved.
What taxpayers should expect from the IRS
The IRS began refunds and account adjustments in late September 2026 and says the work will continue until the eligible accounts are completed.
If the adjustment produces an overpayment, the IRS may issue a refund or apply the amount to certain outstanding federal tax liabilities or other debts as required by law.
The adjustment also may reduce a balance due without creating a cash refund.
In some cases, the account may show no change if the taxpayer’s original calculation was already correct or if other account information affects the result.
Taxpayers whose accounts are adjusted should receive an IRS notice explaining what changed, including whether IRS refunds were issued.
The agency says notices generally will arrive within 30 days of the adjustment.
The notice should identify the amount of the adjustment and explain whether it resulted in a refund, a reduced balance or an amount applied to another debt.
Taxpayers should compare the notice with their 2025 tax return and retain it with their tax records.
Why the refund may not appear in Where’s My Refund
The IRS says this type of account adjustment will not appear in the standard Where’s My Refund tool.
Taxpayers should instead review the notice mailed by the agency or check their IRS Online Account after the adjustment has been processed.
An updated tax account transcript or record of account transcript may also show the change.
The IRS encourages taxpayers to use an Online Account to review tax records, notices, refund information and account activity securely, including information about IRS refunds.
Taxpayers who agree with the adjustment generally do not need to respond to the notice.
What to do if a refund is offset
An automatic refund may be reduced or fully offset when the taxpayer owes certain past-due federal or other legally recognized debts.
The IRS says the notice will explain an offset when one occurs.
For married taxpayers filing jointly, part of an offset refund may belong to a spouse who is not responsible for the debt.
In that situation, the affected spouse may be eligible to file Form 8379, Injured Spouse Allocation, if the form’s requirements are met.
Taxpayers should review the notice and the applicable form instructions before submitting an injured-spouse claim.
How the adjustment affects future adoption credit carryforwards
The automatic adjustment may change the amount of adoption credit available to carry forward to tax year 2026.
A larger refundable credit for 2025 can reduce the nonrefundable carryforward remaining for future years.
The IRS says taxpayers should not use the total IRS refunds or reduced balance shown on the notice as the amount of the refundable credit increase.
Those totals may include other payments, credits, offsets, interest, penalties or account adjustments.
Instead, taxpayers should use the specific increase in refundable adoption credit shown in the notice, transcript or updated account information.
The IRS recommends keeping the notice, the tax account transcript and the corrected adoption credit carryforward worksheet with the taxpayer’s records.
Those documents may be needed when preparing the 2026 tax return.
What taxpayers should know about amended returns
Most taxpayers affected solely by this IRS interpretation generally should not file Form 1040-X to request the additional 2025 adoption credit.
The IRS is making the adjustment systemically when its records provide enough information to calculate the correction.
Filing an unnecessary amended return could create additional processing work and may not accelerate IRS refunds or the adjustment.
Taxpayers should follow any specific instructions in an IRS notice and consider professional tax advice if their return involves other unresolved issues.
An amended return may still be relevant for a separate error or omission that is not covered by the automatic IRS adjustment.
Key dates and limits for the 2025 adjustment
| Item | What the IRS says |
|---|---|
| Announcement date | October 16, 2026 |
| Refunds and adjustments began | Late September 2026 |
| Expected completion | Most eligible taxpayers by the end of 2026 |
| Tax year covered | 2025 only |
| Potential carryforward years | 2020 through 2024 |
| Refundable limit | Up to $5,000 per qualifying child, subject to applicable limits |
| Amended return | Generally not required solely for this adjustment |
What to keep for the 2026 tax return
Taxpayers should keep a copy of their 2025 federal return, Form 8839 and any adoption credit carryforward worksheets.
Records of qualified adoption expenses and employer-provided adoption benefits may also be important when calculating the credit.
After the IRS adjustment, taxpayers should use the corrected 2025 adoption credit information when preparing their 2026 return and reconciling any IRS refunds.
The special treatment announced for 2025 does not mean that an adoption credit carryforward will automatically be refundable again in 2026.
Taxpayers should follow the 2026 forms and instructions when determining the credit and any carryforward for that year.
The IRS says taxpayers should not call unless an IRS notice specifically instructs them to do so, because telephone assistors may not have additional information about this specialized adjustment.
Frequently Asked Questions
Who may receive an automatic IRS adoption tax credit refund?
Taxpayers whose 2025 return and IRS account information show eligible adoption tax credit carryforwards from 2020 through 2024 may qualify for an automatic adjustment. Not every adoption credit claimant will receive additional money.
Do taxpayers need to file an amended return?
Generally, no. The IRS says eligible taxpayers usually do not need to file Form 1040-X solely to receive the additional refundable adoption credit created by this account adjustment.
How much of the adoption tax credit may be refundable?
For tax year 2025, up to $5,000 per qualifying child may be refundable, subject to applicable income, credit and other eligibility limits.
How will taxpayers know whether the IRS adjusted their account?
The IRS says it will send a notice explaining the adjustment, generally within 30 days. Taxpayers may also review their IRS Online Account or tax account transcript.
Will the adjustment appear in Where’s My Refund?
No. The IRS says Where’s My Refund will not provide information about this type of account adjustment. Taxpayers should check the IRS notice, Online Account or transcript.
Does the special treatment apply to 2026 tax returns?
No. The IRS says the special treatment described in this guidance applies to tax year 2025 only. Taxpayers should follow the 2026 forms and instructions for future returns.
Fact-Checked: Facts were checked against the IRS announcement dated October 16, 2026, IRS adoption credit carryforward FAQs, IRS Working Families Tax Cuts guidance and the 2025 Form 8839 instructions.
Disclaimer: This article provides general tax information and is not a substitute for individualized advice from a qualified tax professional.
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