Daniel Gray CPA
Removing the mystery out of CRA request for IRS transcripts
There have been many questions regarding CRA requests for IRS transcripts to substantiate foreign tax credit claims on a T1 return.
Does CRA want IRS ‘tax return transcript’? If yes, why would that document prove anything more than 1040 return copies CRA rejects?
Does CRA want IRS ‘account transcript’?
Where taxpayer wishes to prove to CRA that no US return was filed to change the effect of a withholding slip (1042-S) will CRA accept official but NIL IRS "Account Transcript" and "Record of Account"?
What about state proof?
Does CRA want proof of tax payment?
What constitutes proof of tax payment?
Can one upload online to CRA these required documents?
CRA has clarified that it needs IRS "Account Transcript". Note that IRS offers various transcript types (e.g. ‘Record of account’ and ‘Tax return transcript’), so be sure to at minimum obtain "Account Transcript". CRA says ‘Tax Return Transcript’ is not a final tax liability document and therefore it is not acceptable on its own’. In other words, it doesn’t carry any more weight than does a preparer 1040 copy.
If a transcript or notice of assessment is not available for the federal, state and/or local/city taxes, CRA will accept proof of payment made to or refund received from the tax authority’ in the form of bank statements, cancelled cheques, or official receipts with the following information clearly indicated:
- that the payment was made to or received from the applicable foreign tax authority;
- the amount of the payment or refund;
- the tax year to which the payment or refund applies;
- the date that the amount was paid or received.
If you are submitting photocopies of a cancelled cheque, you will need to copy both sides of the cheque unless the front has been micro-encoded by the banking institution.
MICR encoding is printed on transaction items such as checks and deposit tickets and read by computers or optical scanners for rapid processing of the items. The MICR encoding of a check is the magnetic ink pattern at the bottom that can be scanned and that contains information about the check.
The MICR line, is at the bottom of cheques and other vouchers and typically includes the document-type indicator, bank code, bank account number, cheque number, cheque amount (usually added after a cheque is presented for payment), and a control indicator.
CRA says one can upload these scanned documents using its online ‘My Account’ system BUT to make sure your documents reach the Processing Review section, enter the reference number (with no spaces) from the first page of your CRA letter requesting these documents in the Case/Reference number box on the Submit documents page. For more information, go to canada.ca/taxes-reviews and click on "Submitting documents electronically."