# Tax refund implications of withdrawing from my RRSP



## UnknownXV (Aug 3, 2013)

Hello fellow Canadians. 

I have a quick question in regards to withdrawing funds from my RRSP. I set it up initially as most do to reduce my tax obligations. This was for taxation year 2011. My RRSP is with ING direct.

I have $2,000 in it, and I want to take all of it out. I'm going to be moving down to the USA next year, and I'd rather have full access to all of my money before going. My question is on how this will impact my taxes. From what I've read, there's a withholding tax of 25% for residents of Quebec. Is this correct? 

If so, would I get this money back when I file my taxes?

As far as I can tell, using this calculator: 

http://turbotax.intuit.ca/tax-resources/canada-income-tax-calculator.jsp

With my annual income of only $7,452 for 2013 (I realize the calculator is for 2012 but it should still be a decent estimation) I would get $1,589. Now, if I understand how RRSPs work, the amount I withdraw from it will be added to my annual income, correct? So then it would go up to $9,452 for 2013. In this case, the calculator states I would get $2,139. That's a bit over a $500 increase. 

Would I also get the $500 that would be withheld when I withdraw from my RRSP back? And if so.. it seems too good to be true? Almost like free money. I must be missing something. 

Thanks in advance for any help.


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## Guban (Jul 5, 2011)

With your relatively low income, you would not be subject to income taxes, so you would get any previously withheld taxes back. This includes any withheld when you took money out of your RRSP. I'm not sure why the calculator would tell you that you would get such a large refund back. I'm not sure about any special Quebec credits.


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## cheech10 (Dec 31, 2010)

Withholding tax for up to $5000 is only 5% in Quebec (assuming you are a Canadian resident). You would get it all back when you file your taxes, because of your income level.


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## Eclectic12 (Oct 20, 2010)

cheech10 said:


> Withholding tax for up to $5000 is only 5% in Quebec (assuming you are a Canadian resident).


This does not appear correct ... the 5% is the Federal withholding tax, with the Quebec income tax in addition to it.

Taxtips says the federal amount is 5% and does not list the Quebec amount.
http://www.taxtips.ca/rrsp/withholdingtax.htm

The AGF and SunLife web site agrees on the 5% Federal and adds 16% Quebec, for a total of 20%.
https://www.agf.com/static/en/learning-centre/investing-for-retirement/withdrawals/index.html
http://www.sunlife.ca/advisor/v/ind...bd2d09fRCRD&vgnextfmt=default&vgnLocale=en_CA

The 20% total amount is still less than the 25% withholding that the OP was originally reading about.




cheech10 said:


> You would get it all back when you file your taxes, because of your income level.


That's what I'm thinking as well.


Cheers


*P.S.*

I'm not a tax expert and have little experience with Quebec taxes so checking with other sources and/or a professional is a good idea.


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## Eclectic12 (Oct 20, 2010)

UnknownXV said:


> ... If so, would I get this money back when I file my taxes?


Maybe ... depending on your other income, other withholding taxes and any credits or deductions - you may see a larger refund or you may see less of a tax bill.




UnknownXV said:


> ... Now, if I understand how RRSPs work, the amount I withdraw from it will be added to my annual income, correct?


That's my understanding as well.




UnknownXV said:


> ... In this case, the calculator states I would get $2,139.
> That's a bit over a $500 increase. ... it seems too good to be true?


Assuming the $7452 has no federal or quebec income taxes withheld then plugging in the 5% Federal (0.05 x $2K RRSP withdrawal) and the 16% Quebec (0.16 * $2K RRSP withdrawal), the calculator says a possible refund is $2359.

Not knowing what variables are in the calculator (ex. basic exemption etc.) and not knowing what your personal tax situation is - it's hard to tell how reasonable the estimate is. However, less than $10K is a small income so it may be reasonable.


Cheers


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## cheech10 (Dec 31, 2010)

You're right; I totally forgot the Quebec portion of the withholding tax.


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