We do not use this kind of expression. I have no idea of how rude is "to talk out of one's ass", but the translation you attempted it is quite rude - even if not used, everybody would understand the meaning and would be rather upset -
I think 'dire sciocchezze' is strong enough, even if it does not contain the word "ass".
You also can say 'ragionare con i piedi' (to reason by one's feet) to convey this meaning without being coarse.
I will try to explain better.
If you say to someone "dici delle sciocchezze" or "ragioni con i piedi"
these are rather strong expressions and he/she can be offended, and you might loose a friend (maybe not, if he/she is a good friend ;-))
But the expression you suggest is much more, it is coarse and vulgar, then you will be judged as not very polite (Merriam-Webster : boorishness or ill-breeding).
Hope I made my point better ... at least I tried
If this can quench your thirst for bad words, where I come from you can say "parlare alla cazzo" ("speak without knowledge") or "fare un lavoro col culo" - the latter meaning "do something badly". Goes without saying that these are not polite expressions. Nevertheless, you can use them with a good friend without really offending him/her, as long as s/he is allowed to reply with a sound "vaffanculo".
Thanks for the explanations. In this case I wanted to tell a good friend of mine that he was talking rubbish, and I knew he wouldn't have minded a little coarse language since we use it amongst each other all the time... And indeed, he would've responded with a sarcastic smile and a 'vaffanculo!'