TORONTO, Jan. 25 /CNW/ - 2009 was a tough economic year for many Canadians. If you withdrew money from your Registered Retirement Savings Plan (RRSP) last year while still earning income, you may have tax consequences on your 2009 tax return.
- RRSPs are designed to help Canadians save for retirement and provide a
tax shelter for the funds. You lose the sheltering benefits when you
make a withdrawal.
- When you request a withdrawal from your RRSP, the financial
institution is required to withhold a certain percentage of tax based
on the amount of the withdrawal:
- 10 per cent on amounts up to and including $5,000
- 20 per cent on amounts over $5,000 up to and including $15,000
- 30 per cent on amounts over $15,000
- The amount withheld at source is not usually sufficient to cover your
final tax liability.
- The money withdrawn from an RRSP is considered income in the tax year
it was received. You will have to add it to the other income you
earned during the year on your tax return.
- Once you withdraw money from your RRSP, the contribution room is lost.
You cannot replace the funds at a later date.
- The Home Buyers Plan (HBP) and Lifelong Learning Program (LLP) do
allow you to withdraw funds from your RRSP without penalty as long as
they are paid back within the appropriate time frames. If the funds
are not repaid, they will be considered income.
A local H&R Block spokesperson can discuss the tax implications of early RRSP withdrawals
About H&R Block Canada
H&R Block Canada has been preparing taxes for more than 40 years and is Canada's leading tax preparation firm. Headquartered in Calgary, Alberta, the company serves Canadian taxpayers in more than 1,100 offices across the country. H&R Block Canada Inc. is a subsidiary of H&R Block, Inc., a diversified company with subsidiaries providing a wide range of financial products and services. Additional information about H&R Block Canada is available at 1-800-HRBLOCK or visit www.hrblock.ca for more tax tips.
Follow the Tax Advisory at H&R Block at www.hrbtaxtalk.ca or @HRBTaxTalk on Twitter.
SOURCE H&R Block Canada Inc.
For further information: For further information: Tina Quelch, Calador Communications, (416) 925-6034, firstname.lastname@example.org