By J.P Finet  Sept 24, 2015 Posted on Taxnotes.com
Australia announced September 23 that it has shared bank information with the IRS for the first time in compliance with the intergovernmental agreement   it signed to implement the Foreign Account Tax Compliance Act (FATCA).

According to a release issued by the Australian Taxation Office (ATO), the details of more than 30,000 financial accounts valued at more than $5 billion were provided to the United States.

“The information provided on U.S. citizens and tax residents with Australian bank accounts is the first step in a wave of transparency measures being implemented globally by Governments and tax administrations,” the ATO release said. “Beginning in 2017, close to 100 countries will be sharing non-resident data under the OECD Common Reporting Standard (CRS).”

The release said the automatic exchange of financial account information was “the new international standard to eliminate tax evasion.” The ATO added that it is committed to ensuring that taxpayers are disclosing their offshore income and that in 2017 it will implement the CRS, under which it will exchange financial account information with almost 100 countries.

Canada’s government had previously stated that it would share its bank information on September 23 in compliance with the Canada-U.S. IGA  , but it was not clear that it had done so. Requests for information from the Canada Revenue Agency were not returned by press time.

Canada made no official announcement of its exchange, but a docket entry in a Canadian federal lawsuit that sought to block the transmission of financial data on reportable accounts to the United States said Canada would begin transmitting data September 23. The lawsuit, Hillis and Deegan v. the Attorney General of Canada [2015 FC 1082   ], was dismissed September 16. (Prior coverage  .)

Foreign Tax Credit

It has recently come to our attention that the CRA changed its policy on review of foreign tax credits claimed by individual taxpayers.  The policy was internally revised on June 1, 2015 but has not yet been rolled out to the general public or practitioners.  It is expected that the communication will be available on the CRA website shortly.  Unfortunately this delay in communication caused a lot of headaches to our clients and has doubled up our time and effort in a relatively routine examination process.

The enforcement primarily relates to a tax accrued or paid to a foreign jurisdiction and reported on a foreign jurisdiction’s tax return.  In the past, a copy of the foreign tax return was sufficient to substantiate the validity of the claim.  This is no longer the case; providing just a copy of the return will result in denial of the related claim.  The CRA now requires a copy of a notice of assessment or a transcript from a foreign tax agency.  This includes federal, state and/or municipal notices of assessments or transcripts.

The US as you may know does not typically issue any assessments unless there is a suggested revision to the return.  Thereby an alternative option would be a transcript of a processed return.  I am attaching two links to the IRS web-site that outline timing and the requirements on requesting a transcript by mail which may take several weeks to receive.  If your US tax practitioner is subscribed to the IRS e-Services (typically available only to US citizen tax practitioners; Hanson Cross-border Tax Inc. has a full access to the IRS e-Service), the transcript can be obtained immediately as long as the Power of Attorney has been previously granted to the practitioner and is in the IRS records.  It gets much more complicated at a state or municipal level since each of them is different.  It may require a practitioner’s judgement on whether to pursue the hurdles of obtaining a transcript or to forgo the claim for the state/municipal portion of the tax.

Another revision applies to tax returns which were issued in income-source-country language other than English or French.  Circling around a relevant number and translating only an appropriate sentence or a section of the return is no longer an acceptable option.  Such returns are now required to be provided with certified English or French translation.

These two developments are just another unfortunate addition to the already increased burden and cost of tax compliance to taxpayers.  If our company assists your clients with US tax work and your client is in need of a US tax transcript, please do not hesitate to contact us and we will provide you with a copy of the federal transcript immediately.