LIRA Witholding Rate?

DallasBill · Post by **DallasBill** » Mon Apr 09, 2007 12:35 pm

I collapsed a 12 year old LIRA two weeks ago and received the cheque today. The bank witheld only $1,100 on a total value of $11,950.

Has the witholding rate for a LIRA changed in 2007 or did TD Canada Trust in Calgary make a mistake?

If they made a mistake, what will I have to do to rectify it and keep life easy for myself in 2008 tax filing. If sending it back and having them do it right is an option, then I'd rather do that than mess with CDN tax forms and filings.

nelsona · Post by **nelsona** » Mon Apr 09, 2007 1:09 pm

there are two possible reasons:

1. Did you submit an NR5 to reduce withholding? Since the rest of your post seems to indicate that you won't be submit a section 217 tax return in canada next year, I'm going to assume this is not the case.

2. They made a mistake. They shouid have withheld 25%. It looks like they withheld at the rate for non-residents. I would call up TD and tell them you will send them a cheque for $1887.50 to be remitted as NR tax. I would also, if you have any other accounts with them, make sure that the NR flags are all turned on.

DallasBill · Post by **DallasBill** » Mon Apr 09, 2007 3:50 pm

You are correct, Nelson. #1 is not applicable.

Your #2 makes sense on the surface of it. However, your reference to [i]"They shouid have withheld 25%. It looks like they withheld at the rate for non-residents."[/i] is somewhat confusing. I AM a non-resident of Canada and have been since 1994. I submitted a letter from CCRA ruling me 'non-resident since 94' to TD when requesting to collapse the LIRA.

Depending on what your [i]"It looks like they withheld at the rate for non-residents."[/i] actually means, perhaps that confused TD?

nelsona · Post by **nelsona** » Mon Apr 09, 2007 4:14 pm

I meant to say that it looks like they withheld at the rates for RESIDENTS.

DallasBill · Post by **DallasBill** » Mon Apr 09, 2007 4:25 pm

Ahhhhhhhh... makes sense. I'll call them.
Cheers!

DallasBill · Post by **DallasBill** » Thu Apr 12, 2007 2:08 pm

Nelson... you are going to get a kick out of this. I called TD Canada Trust in Calgary and they said they only collapse/release non-resident LIRA funds after confirming with CCRA the non-resident status (i.e. they had a copy of my CCRA letter) and confirming the witholding amount. The lady I have been dealing with said they were told 10%. So, since she followed CCRA advice, she suggested I call CCRA and clear it up with them.

I HATE bankers... :roll:

I think I'll just wait and see.

(The money went into our non-deductable IRAs here anyway. :) )

nelsona · Post by **nelsona** » Thu Apr 12, 2007 2:19 pm

The rate is 15%.

Not sure what you meant about the the IRA. That doesn't change its tax treatment in either country.

DallasBill · Post by **DallasBill** » Thu Apr 12, 2007 2:53 pm

I was merely making an aside that I'm reinvesting the money here... it meant nothing more.

In post #2 you said 25% (which is what I previously thought it was). For all I know, CCRA is right at 10%, so I'm just waiting it out, now. They know where to find me.

nelsona · Post by **nelsona** » Thu Apr 12, 2007 3:22 pm

Yikes.

25%

25%

25%.

DallasBill · Post by **DallasBill** » Thu Apr 12, 2007 3:24 pm

LOL :wink:

nelsona · Post by **nelsona** » Thu Apr 12, 2007 3:25 pm

I aggree -- kind of.

Wait to see what the NR looks like. if it has the wrong code, it'll be TDW's problem.

But if it is coded correctly, you will have to pay at some point.

DallasBill · Post by **DallasBill** » Mon Feb 25, 2008 12:56 pm

Nelson... I'm back. ;-)

Is a T4RSP the form that would typically be sent to a U.S. resident for the LIRA collapse I did, because that's what I just received. It reflects the total collapsed amount and the (only) 10% they withheld. I'm about to fill out my 8891 and get the return to our accountant. I'm wondering if CCRA may be wondering why they got a T4RSP for me, I guess.

TDW was adamant they withheld properly!

nelsona · Post by **nelsona** » Mon Feb 25, 2008 2:10 pm

You were NOT properly withheld.

You will need to send the extra 15% to CRA.

... and you should havebeen issued a NR receipt.

For your US taxes this does give you a slight problem, as it means you can't use the entire 15% tax as a deduction for 2007, you must split it over 2007 and 20008, as you must have PAID the tax during the year to get the deduction.

You can still use the 25% as a credit, as this is the accruued tax on your LIRA withdrawal.

nelsona · Post by **nelsona** » Mon Feb 25, 2008 2:15 pm

I would remind you that strictly speaking, for NR tax, it is the responsibility of the PAYOR (TDW in this case) to correctly withhold and remit NR tax. CRA has often held the PAYOR jointly liable since it is more likely that they can get their hands on a CDn PAYOR than some foreign PAYEE, like you.

But, in the end, it is probably you who will end up paying, so you might just want to get it over with.

To sum up. There is NO question that 25% tax should have been withheld and remitted to CRA

DallasBill · Post by **DallasBill** » Mon Feb 25, 2008 2:28 pm

Thanks.

In our case, using the 25% as a credit is the best way to go, so I don't need to worry about that.

Getting through to CRA now as to what to do is the issue -- their International 800 number rings busy all the time!