Personal Finance

RRSP With Holding Tax - Keeping it to 10 % for $ 7,000 withdrawal.

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  • Apr 14th, 2016 9:34 pm
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Banned
Apr 9, 2016
208 posts
9 upvotes

RRSP With Holding Tax - Keeping it to 10 % for $ 7,000 withdrawal.

I have around $ 7,000 in RSP Savings Account.

Upto $ 5,000 withdrawal there is a 10 % with holding tax. and $ 5,000 to $ 15,000 its 20 % WH Tax.

so if I withdraw in batches of $ 3,500 twice will they withhold 20 % or just 10 % ? Will they catch on and know , what I did ? I will maybe wait 1 week between each withdrawal :)

I know I will get it back when I file my taxes, but right now I want just 10 % with holding tax and not 20 %, as I need the money urgently for some stuff. Its only getting 0.8 % interest any ways in the RSP account. I know it will be added to my income and I will get a T4 RSP slip later on. But I am OK with that, as I am travelling and taking a break from work for a few months, so my income will be less this year anyways.
9 replies
Deal Fanatic
May 4, 2014
5217 posts
7141 upvotes
Toronto, ON
tangerinebarbiegirl wrote: I know I will get it back when I file my taxes, but right now I want just 10 % with holding tax and not 20 %, as I need the money urgently for some stuff. Its only getting 0.8 % interest any ways in the RSP account. I know it will be added to my income and I will get a T4 RSP slip later on. But I am OK with that, as I am travelling and taking a break from work for a few months, so my income will be less this year anyways.
What province are you in?

If you are in Ontario, even 20% withholding tax will not cover the lowest tax bracket(20.5% combined) and you will still owe taxes when you file.
Banned
Apr 9, 2016
208 posts
9 upvotes
er34er34 wrote: What province are you in?

If you are in Ontario, even 20% withholding tax will not cover the lowest tax bracket(20.5% combined) and you will still owe taxes when you file.
This year I will be making less, as I am taking a break and travelling. With Personal Tax exemption credit, some other rebates and credits and few other carry forward credits from a few years back (mostly tuition) , I will get most of it back.
Sr. Member
User avatar
Apr 22, 2014
552 posts
279 upvotes
Edmonton, AB
It depends on the institution but usually splitting them up will avoid the additional withholding tax. Just make sure to wait a while between them.
Sr. Member
Dec 1, 2003
608 posts
250 upvotes
Ottawa
This is my experience with CIBC.

Limit withdraw to $5000 per day (to limit withdrawal tax holding). Splitting to multiple transactions on the same time/day doesn't help with the withdrawal tax rate.
Deal Fanatic
Jan 21, 2014
8518 posts
6261 upvotes
There may be a fee for each withdrawal so you may have to pay the fee twice doing 2 transactions
Deal Addict
Jul 8, 2009
2028 posts
482 upvotes
Edmonton
I'm a financial planner. If financial institutions know that there will be multiple withdrawals they're supposed to base the withholding tax on the total of the withdrawals. It doesn't always happen that way. If you do each withdrawal separately and don't tell them you'll be doing more they'll use the lesser percentage. Or you could just ask if they'll use only 10% even if they know there are others. They may agree.
Banned
Apr 9, 2016
208 posts
9 upvotes
mkl38s wrote: There may be a fee for each withdrawal so you may have to pay the fee twice doing 2 transactions
There is no fee for me. I am just withdrawing from their RSP Savings account to their own regular Savings account. If I transfer to some other financial institution they have a fee, otherwise no fee, except for the Gov. mandated withholding tax.
Banned
Apr 9, 2016
208 posts
9 upvotes
crow wrote: This is my experience with CIBC.

Limit withdraw to $5000 per day (to limit withdrawal tax holding). Splitting to multiple transactions on the same time/day doesn't help with the withdrawal tax rate.
I will do them, maybe a week apart. Maybe 5,000 + 2,000
Deal Addict
Jan 16, 2016
1477 posts
1139 upvotes
Hamilton, ON
Wing Nut wrote: I'm a financial planner. If financial institutions know that there will be multiple withdrawals they're supposed to base the withholding tax on the total of the withdrawals. It doesn't always happen that way. If you do each withdrawal separately and don't tell them you'll be doing more they'll use the lesser percentage. Or you could just ask if they'll use only 10% even if they know there are others. They may agree.
This is correct. They're supposed to rate it by the total. If they don't then you get lucky.
Paying tax on it now is just that, when you file you'll say you paid X amount in tax and you'll get it back if your income in the lower brackets as you say.

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