wrong RSP withholding Tax Rate

uscanadatax · Post by **uscanadatax** » Wed Nov 20, 2013 11:55 pm

I cashed out all RSP as US resident, request lumpsum check. However, I found the bank only withhold 15% of the gross payment. Called bank, they don't have answer now.

My question is,

1) I lumpsum the RSP (the bank told me the account was already closed after cash out all money), but the address changed to US was happened in mid of 2013, will this bring the withholding rate reduce to 15%? I am a whole year nonresident, but address change was in the mid of 2013.

2) If the bank cannot correct it, what should I do, file tax return and pay the rest 10%?

3) If I need pay 10% by myself, I don't have Canadian Checking account, may I let my relative issue his personal check on my behalf, but memo for my SIN, to pay the difference?

It is really urgent, thanks advance for your help or suggest.

nelsona · Post by **nelsona** » Thu Nov 21, 2013 5:55 am

You owe CRA 25% tax on the withdrawal. Since the bank only withheld 15%, you should write a letter to CRA, and include the extra 10% payment, at year end when you get your NR slip. How you pay it doesn't really matter.

This is the same that would be done if you forgot to tell them you were non-resident, and they withheld the Cdn-rate withholding.

You do NOT report this on a Cdn tax return.

Remember also to report the RRSP and the withdrawal on an 8891 form in US, including the US-taxable portion based on your book value on arrival in US

uscanadatax · Post by **uscanadatax** » Thu Nov 21, 2013 9:44 am

Thanks Nelsona. I have two more questions,

Which address of CRA should I use to mail the difference of tax and the statement with the copy of NR slip? CRA doesn't accept US check but Canadian Check, right?

Or if I don't take any action, will CRA send me any notice so that I could follow?

Thanks again!

nelsona · Post by **nelsona** » Thu Nov 21, 2013 10:37 am

You no doubt prepared a departure return last year, when you left canada, so CRA International division has your file. Use the CRA International address, next spring.

Look in the non-resident tax guide to see what form of payment they accept. I would not be awaiting for a notice. You owe the tax, and can use it on your US return.

I guess you now realize that closing a Cdn bank account is not the wisest move to make. It is always good to keep an account and credit card for future use.

uscanadatax · Post by **uscanadatax** » Thu Nov 21, 2013 11:13 am

Sorry I am so stupid on tax.CRA has no record for my departure since many years for nonresident. Will this a problem if I send in the tax and statement? This is the only my Canada taxable income.

US tax is fine, I have all required forms on current. But what about Canada tax? No matter whether correct or wrong NR4 issued, will it be another trouble that NR4 slip issued but I didn't file departure return many years ago? :cry:

nelsona · Post by **nelsona** » Thu Nov 21, 2013 11:48 am

They can only go back three years. When did you leave?

uscanadatax · Post by **uscanadatax** » Thu Nov 21, 2013 12:37 pm

10 years ago, shame on me :-(

So you mean it will be fine if CRA got the NR4 slip but don't have my departure or anything else on file?

I just want to clear up all the tax issue, earn money and pay tax. But the tax system, especially US and Canada are too much tricky for me.

thanks.

nelsona · Post by **nelsona** » Thu Nov 21, 2013 1:47 pm

You are fine. They prooably assume you have left. You might want to indicate the year you left in your letter.