Documenting your US Foreign Tax Credit - Presley & Partners - Presley & Partners


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September 21st, 2016

Documenting your US Foreign Tax Credit

Dave Christie, CPA, CGA

David C_E5Q9313Recent changes require different paperwork – but don’t worry it’s easy to get!

Many Canadian residents, through either American citizenship or past American residency, are required to file US tax returns and pay taxes to the Internal Revenue Service (IRS). If you pay taxes in the US, you may be able to lower your Canadian taxes by claiming a Foreign Tax Credit (FTC). However recent changes by the Canada Revenue Agency (CRA) require new documentation for the FTC. Here’s some information on what’s now needed and how to get it.

CRA and Foreign Tax Credits basics

The CRA regularly reviews claims made by taxpayers for FTCs, based upon the tax treaties Canada has signed with many countries.

The review process requires that taxpayers provide documents to the CRA ensuring their claim for the FTC meets the treaty criteria; it also proves that the taxes were paid in the foreign jurisdiction.

Documentation rules changed in 2015

Until recently, the CRA accepted a copy of the US tax return as proof of the tax liability in the US; no Notice of Assessment or other proof was generally required. But in late 2015, the CRA revised its documentation rules and now requires the American version of our Notice of Assessment. Unfortunately, the IRS doesn’t always send one out to taxpayers.

The good news is that it’s very easy to order one on-line.

How to ‘Get Transcript’ from the IRS

The “Get Transcript” service on the IRS website provides an easy, free way to obtain the tax “Account Transcript” required by the CRA. You can obtain one directly online by providing personal information from your most recent US tax return, as well as a credit card number or some other credit account number. Alternately, you can request a transcript be mailed to you. All you need to provide is your Social Security Number, date of birth and the mailing address from your latest US tax return.

To access the service, simply go to the IRS website and search for “Get Transcript.” There you will see two option buttons: Online and Mail.

Information must be entered exactly as on the US tax return – if no space was entered in the postal code on the return, enter it exactly the same way when requested by the website. If you filed jointly with your spouse, only enter the first name listed on the return.

Once you’ve obtained access, you can choose from the past three years’ tax returns. Select the “Account Transcript” from the Type of Transcript menu. The mailed transcripts will arrive approximately three weeks later.

It’s that simple and only takes about ten minutes.

Questions? Contact us at Presley & Partners.

David Christie is a Chartered Professional Accountant, CGA and Manager with Presley & Partners, CPAs and Business Advisors, in Courtenay, BC. He can be reached at 250.338.1394 or