SUPPORTING U.S. FOREIGN TAXES PAID
Since 2015, there has been a series of changes in the evidence CRA will accept to support foreign taxes paid for purposes of the foreign tax credit. While CRA has indicated they will accept some alternative forms of support for taxes paid in the U.S., their clear preference is a federal account transcript from the IRS and equivalent documents from the individual state tax authorities. Some practitioners have experienced significant delays and challenges in obtaining these.
A July 4, 2019 Baker Tilly article (New IRS security measures could cause problems for U.S. citizens in Canada, John Oakey) discussed changes at the IRS which will make transcripts more difficult to obtain. Due to concerns over fraudulent claims, the IRS will no longer send transcripts by fax under any circumstances, effective June 28, 2019. Further, they will send transcripts by mail only to the taxpayer’s address, even where they are requested by third parties (e.g. Form 4506, 4506T or 4506T-EZ), commencing July 1, 2019.
This will mean practitioners must rely on the client to receive and deliver the transcript to address any CRA information requests. The article also summarized the alternative documentation CRA indicated they would accept, since 2016.
For further information see Video Tax News Monthly Tax Update Newsletter, Issue No. 456.