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Over 50,000 households will see money from adoption credits they had given up on. Some will find the IRS kept part of it.

For years, many adoptive parents have carried a number on their tax returns that never seemed to turn into anything. It was the unused part of their federal adoption credit, rolled from one year to the next because their tax bill was too small to absorb it. This fall, the IRS started turning that number into cash for tens of thousands of families.

On Oct. 16, 2026, the IRS announced in news release IR-2026-123 that it had begun sending refunds to more than 50,000 taxpayers with adoption credit carryforwards. The agency expects to finish most of them by the end of the year. Most families do not need to file anything to get paid.

That is the good news. The less-advertised part is that some of this money will never reach a bank account, and the notice explaining why is easy to misread. Here is what changed, who benefits, and what to look for when the letter arrives.

The federal adoption credit helps cover the cost of adopting a child: agency fees, court costs, attorney fees, and travel. For 2025, the maximum credit is $17,280 per eligible child, according to the IRS instructions for Form 8839.

For most of the credit’s history, it was nonrefundable. It could reduce the tax you owed to zero, but it could not pay you anything beyond that. If your credit was larger than your tax bill, the extra rolled forward for up to five more years. Anything still unused after that simply expired.

That structure worked against the families who often needed the help most. A household with modest income and a large adoption bill could carry thousands of dollars forward year after year and never use it.

The Working Families Tax Cuts law changed that starting with tax year 2025. Up to $5,000 of the credit, figured separately for each child, became refundable. That means it can now be paid out even if you owe no tax at all.

When the refundable portion first took effect, credits carried forward from earlier years were left out of it. Form 8839’s 2025 instructions say a carryforward from 2024 stays a nonrefundable credit. So a family carrying $8,000 from a 2023 adoption could not get any of it paid out, even under the new rule.

Treasury has now clarified its reading of the law. For tax year 2025 only, carryforwards from tax years 2020 through 2024 can increase the refundable part of the 2025 credit. The $5,000 per child cap still applies.

In practical terms, a family that owed little or no federal tax for 2025 and had a carryforward on its return could now receive up to $5,000 for each adopted child. Families who adopted siblings or twins and claimed each child could receive more in total.

The IRS says it is adjusting accounts itself rather than asking families to amend their returns. Adjustments started in late September and will continue until the work is done.

• Filed your 2025 return before April 15, 2026? You should generally receive any adjustment automatically.
• Filed on extension? Your account will be reviewed later in 2026, after the return is processed.
• Account flagged for identity theft, a freeze, or a dependency conflict? Expect a delay until that issue is resolved.

This is a one-year window. Any carryforward left after the 2025 adjustment goes back to being nonrefundable in 2026. It can still reduce tax you owe, but it will not be paid out.

The IRS will send a notice, generally within 30 days of adjusting your account. It will show the amount and whether it was refunded to you or applied to another tax or non-tax debt.

That second possibility is where many families will be caught off guard. The IRS normally applies refunds to back federal taxes first. Through the Treasury Offset Program, refunds can also be taken for debts such as past-due child support, certain federal agency debts, and some state tax and unemployment debts. A Californian who owes the Franchise Tax Board could see part of this refund go toward that balance.

If you have an IRS payment plan, an unresolved balance from a prior year, or a state tax problem, do not assume the full $5,000 is coming to you. Wait for the notice, and read it line by line.

1. Confirm it is real. The IRS sends notices by mail. It does not contact people by text, email, or social media about refunds. With “$5,000 IRS payment” in the headlines, scammers will use this story. Check your IRS Online Account to confirm the notice matches your records.
2. Compare it with your 2025 return. Check the credit amount, the number of children, and the carryforward figure against your Form 8839.
3. Look for an offset. If the refund was applied to a debt, the notice should say so. A refund applied to a balance you believe was already resolved is a red flag worth raising.
4. Keep it with your tax records. The adjustment changes your remaining carryforward, which matters for your 2026 return.
5. Don’t ignore a reduced balance. For some families, the adjustment will not produce a check at all. Instead, it lowers what they owe. That is still worth confirming.

The IRS can only adjust what it can see. If you were eligible but never claimed the adoption credit, or left the carryforward off your 2025 return, the agency may not have enough information to act on its own. In that case, an amended return may be the way to claim it. Because the refundable treatment applies to 2025 only, it is worth having a professional review your adoption paperwork and past returns soon.

This episode is a small example of something tax professionals see every day: a change in IRS interpretation can create money, or a bill, for people who never asked for anything. The families receiving these refunds did nothing new. The rules shifted under them.

The same is true in reverse. Automated adjustments, offsets, and matching notices are a growing share of how the IRS deals with taxpayers. Knowing how to read a notice, and when to question one, is now part of protecting your money.

• Do I need to file an amended return? Most eligible families do not. The IRS is adjusting accounts automatically when the carryforward appears on the 2025 return.
• How much can I receive? Up to $5,000 per qualifying child, depending on your carryforward and your 2025 tax situation.
• When will I get it? The IRS began in late September 2026 and expects most refunds by the end of the year. Extension filers and flagged accounts will take longer.
• Can the IRS keep my refund? Yes. It can be applied to back taxes or, through the Treasury Offset Program, to certain other debts. Your notice will say if that happened.

If your adoption credit refund was applied to a tax debt you are disputing, or you have an IRS or Franchise Tax Board balance you want resolved, Leading Tax Group can review your notices. Our team includes tax attorneys, a former IRS auditor, and a former IRS appeals officer. Book a free consultation or call 800-900-4250.