Would it be worth filing an amended return? Or is the IRS calculation definitely correct here? We're talking about thousands of dollars difference!

If the IRS followed the correct ordering of credits according to tax law, filing an amended return wouldn't change the outcome. The order of application is established in the tax code, and the IRS systems are programmed to follow that sequence. What I would recommend instead is planning for next year to maximize your use of the adoption credit. Since you can carry it forward for up to 5 years, you might be able to adjust your withholding or make other tax planning moves to ensure you have enough tax liability next year to absorb more of the adoption credit. The credit isn't lost - it's just delayed in providing you benefit.

We got a notice but it was super vague - just said our refund was reduced with a different amount but didn't explain the calculation. Called IRS and they basically just confirmed what I already knew - they applied CTC then ACTC then said no tax liability left for adoption credit. But they wouldn't explain WHY they did it in that order when it seems wrong. Can adoption credits be used against self-employment tax? We both have some 1099 income along with our W2 jobs.

The adoption credit cannot be used against self-employment tax - that's a key limitation that sometimes causes confusion. It can only offset your income tax liability, not the SE tax portion. If you have self-employment income and paid SE tax, that might explain part of the discrepancy. The adoption credit can't touch that portion of your tax bill. What might have happened is that after applying the CTC against your income tax liability (not SE tax), there wasn't enough regular income tax liability left for the adoption credit to offset. The good news is that the unused adoption credit doesn't expire this year - you can carry it forward for up to 5 years on future returns.

Do you know approximately how much CAAs typically charge? And do they actually speed up the IRS processing time or just the document verification part? I'm trying to decide if it's worth the extra cost.

CAAs typically charge between $50-$300 depending on your location and the complexity of your situation. They don't actually speed up the IRS processing time for issuing the ITIN itself, but they eliminate a huge bottleneck in the process - the document verification stage. When you apply on your own, the IRS has to verify all your identity documents before even starting to process the ITIN application, which can add weeks. CAAs are pre-authorized to do this verification, so your application enters the IRS system at a more advanced stage. Another benefit is that you keep your original documents, which reduces risk and stress.

I did exactly this last year. You can write "ITIN Applied For" on your tax forms and file them with your W-7 application. Once the IRS processes your ITIN application, they'll associate the number with your already-filed return. Just make sure to keep copies of EVERYTHING.

Is it better to have more or less withheld though? I always heard you should get your withholding as close as possible to what you'll actually owe. But my dad says I should withhold more so I get a big refund. Who's right?

From a purely financial perspective, it's better to have your withholding match your actual tax liability as closely as possible. When you overwithhold, you're essentially giving the government an interest-free loan of your money throughout the year. However, some people prefer getting a refund because it feels like a "bonus" and helps them avoid the risk of owing money at tax time. It really comes down to your financial discipline and preferences. If having more withheld helps you save money you might otherwise spend, there's some psychological benefit to that approach.

This is a really good point! I made this exact mistake my first year working during college. My withholding was way off because I didn't indicate I was a dependent. OP, definitely check with your parents about whether they claim you on their taxes!

That's a good point - I did file a mail forwarding request with USPS but maybe the IRS notice didn't get forwarded correctly. I'm friendly with the new tenants so I could ask them to check if anything came for me. Any idea what these verification notices usually look like so I can tell them what to look for? And if they don't find anything, is there a way to request a copy of whatever notice was sent?

The identity verification letters are usually pretty obvious - they come in IRS envelopes and typically have "Action Required" or something similar printed on them. They're letter 5071C, 5747C, or 5447C usually. If your new tenants can't find it, you can request a copy of the notice by calling the IRS or checking your online account. If it's an identity verification issue, you might be able to complete the verification online through the Identity Verification Service without the original letter. Just go to the IRS website and search for ID verify. You'll need info from previous tax returns, so have that handy!

This actually works! My brother had a similar issue and after contacting his congressman's office, his refund was processed within 3 weeks. They have special liaisons that work directly with the IRS.

Does it matter that her state return was already accepted with the married name? Won't that cause problems when the federal return has a different last name?

States operate their own tax systems separate from the federal IRS system, which is why one might accept a return while the other rejects it. Some states don't verify against the SSA database as rigorously or might batch their verification processes. Having different names on your federal and state returns isn't ideal but it's not catastrophic. When you file with your maiden name federally, include a brief statement explaining the situation with your state return. The key issue is ensuring your tax ID numbers (SSN) match on both returns. Most tax agencies understand that name changes happen and have procedures to handle these timing mismatches.

Thank you so much for sharing your experience! I was worried I was the only one dealing with this. I'll go ahead and refile with my maiden name tonight. Did you have any issues with your state return? Mine was already accepted with my married name.

My state return actually got rejected too, but I'm in Texas so we don't have state income tax - it was just for my property tax stuff. I had to fix that one separately. If your state return already went through with your married name, you might want to call your state tax agency and ask them what to do. Some states are more laid back about the name matching than the IRS is. The important thing is that your social security number is consistent on both returns!