Blog: A new documentary requirement for claiming a foreign tax credit

October 24th, 2016 tax credit

The CRA recently expanded its audit procedures and policies with regard to documentation requirements. Taxpayers with income from US sources are required to produce a transcript to support their claim for a foreign tax credit.

A transcript can be viewed as the US equivalent of the notice of assessment. Transcripts are of three types.

 

  • The Return Transcript, which includes most of the line items of a tax return as filed with the IRS
  • The Account Transcript, which contains information on the financial status of the account, such as payments made in the account, penalty assessments, and adjustments made by the IRS subsequent to the tax return being filed.
  • The Record of Account, which provides the most detailed information being a combination of the Return Transcript and the Account Transcript. This document is available for the current year and three prior taxation years.

In contrast to Canadian tax authority practices, the IRS does not systematically issue a transcript to taxpayers who meet their tax obligations. Thus, in order to obtain a transcript a taxpayer is required to send a request to the IRS (most requests are processed within 10 business days) using one of the following means:

  • Register online on IRS web page using the Get Transcript Online link to view, print, or download all transcript types listed above.
  • Use IRS’ online tool via the Get Transcript by Mail link or by calling 800-908-9946 to order a tax return transcript and/or a tax account transcript.
  • Fax/mail Form 4506-T, Request for Transcript of Tax Return as instructed on the form to request any transcript type listed above.

A SSN (required to register online) or an ITIN (Individual Tax Identification Number) is required to request a transcript. It should be noted that not all US non-residents are qualified for SSN status. Those not eligible for a SSN who are required to file a US tax return, will need to apply for an ITIN. It usually takes 7 weeks to be assigned an ITIN after submitting a complete application file.

Caution: If you filed a US tax return for only one year, the IRS may not be able to issue the above documents online electronically.

Contact your Crowe BGK LLP advisor for further details on how to claim your foreign tax credit.

About the Author:

Guy Dassi, CPA, CGA, M.sc., MAP, is a Tax Advisor at Crowe BGK.

Connect with him: g.dassi@crowebgk.com

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