RRSP January Withdrawal Before Becoming Canadian NR

jmg · Post by **jmg** » Tue Dec 31, 2013 8:50 pm

I have $11k in a RRSP Savings. No other savings or investment accounts, just a checking account.
I resigned from my Canadian job in December 2013. I will be starting work in the US mid-January 2014. Therefore, I should have no Canadian income in 2014.

If I withdraw the $11k from the RRSP while still in Canada (before going to the US and becoming a non-resident), will I only be taxed the 20% withholding tax and no additional income tax for 2014?

Is it in my interest then to collapse the RRSP BEFORE I leave Canada, since the flat tax withdrawal rate is 25% upon becoming a non-resident?

nelsona · Post by **nelsona** » Wed Jan 01, 2014 6:48 pm

In your departure year, which will be 2014, you do not get the usual personal deductions, as you would if you were a Cdn resident for the entire year. Thus your RRSP withdrawal will be reported on your departure return, and the tax will be calculated there, regardless of what was withheld. The taxrate will be the lowest rate of your province (fed and provincial) which may or may not be more than 25%.

If you wait until after you leave and establish US tax residency, the the RRSP tax will be a flat 25%, as you correctly state.

If this really will be your only income in 2014, then I would probably take the money now, and report it on your departure return in spring 2015. The taxrate will not be that much if any lower than 25%, but it will get this account of the books, simplifying your life.

It will have to be reported in US as a foreign account, since you still have it in 2014.