RRIF Witholding Surprise

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Philmbrown
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Joined: Fri Apr 24, 2020 3:00 pm

RRIF Witholding Surprise

Post by Philmbrown » Mon Apr 27, 2020 10:45 am

This is a repeat request as I originally sent my question via your "Contact Us" button on April 25. I received a notice from CRA on March 15 that I owed additional taxes of my RRIF withdrawals in 2015 and 2016. The RBC advised me when I set up the RRIFs to use the 15% withholding. I am a US Resident. The gist of the recent CRA demand is that I should have paid 25%, not 15%, as the 24 monthly withdrawals are a lump sum payment, not periodic. Websters Dictionary would challenge the CRA on their "longstanding position" of regular withdrawals not being periodic. Anyway, is there any escape from this? Does IRS Publication 597 (10/215) defend the 15%?
When I spoke to RBC, they originally said they would not amend the 2015 and 2016 NR4 statements, as "they were too old". Does it also mean the CRA has missed a deadline for asking me to pay the additional 10%? Please and thanks for your reply!

nelsona
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Re: RRIF Witholding Surprise

Post by nelsona » Tue Apr 28, 2020 9:33 pm

The definition of periodic has nothing to do with the regularity of your RRIF withdrawals, and everything to do with (a) your age, and (b) the percentage of your funds you withdrew during the year, ie. less than 10%

Keeo in mind that in the first year of your RRIF, you are not allowed any 15%-taxed withdrawls.

Give me some numbers, and we will see if CRA is right.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nelsona
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Re: RRIF Witholding Surprise

Post by nelsona » Wed Apr 29, 2020 6:00 pm

Also, there is no point in asking RBC to do anything,. NR4's report what was done: the withdrawals and the withholdings. Even those for 2019 are done, as long as they report the facts correctly.

As to how far back CRA can go. Since you did not file a return, and there was never an assessment, the rule is 6 years. Had you filed a return and it was assessed, CRA could go back 3 years.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Philmbrown
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Joined: Fri Apr 24, 2020 3:00 pm

Re: RRIF Witholding Surprise

Post by Philmbrown » Fri May 01, 2020 9:34 am

Hi Nelsona: In 2015, I was 67. I withdrew $60,000 over 12 months, at $5000 per month, less $750 monthly in withholding (15%). I depleted the RRIF. Ditto in 2016 with a second RRIF. Am I cooked?

nelsona
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Re: RRIF Witholding Surprise

Post by nelsona » Fri May 01, 2020 9:59 am

Infortunately, yes.

You are only allowed to withdraw ~10% of the Beginning-of-year value, for it to be periodic. It might be a little more because of your age, but certainly not the whole value. It doen't matter how many withdrawals.

Now, you *could* hold RBC liable for not having informed you, and make CRA go after them for the withholding that THEY FAILED to properly withhold. I assume you are in UDS and have no other Cdn financial ties?
Technically, when it comes to non-resident tax, the payor (RBC) is as liable as the payee (you), because CRA assumes that foreigners are not reachable once they get their money.

Can you se the extra tax on your US retrns, as foreign tax credit or deduction? You did report the taxable income from the RRIf on your US return, right?
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Philmbrown
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Joined: Fri Apr 24, 2020 3:00 pm

Re: RRIF Witholding Surprise

Post by Philmbrown » Fri May 01, 2020 3:15 pm

Hi Nelsona:
You have been very helpful. I don't choose to go after RBC; the damage has been done. As well, I checked on amending my 2015 and 2016 US returns, and learned that I had only three years from the date of filing to make those amendments, which would be around $6,000 in extra CAD taxes per year.

I can't claim the tax liability to the IRS as 2020 tax paid, can I? These areback taxes, are they not? If I can pay CAD taxes for 2015 and 2016 as a 2020 payment, I will do so. My concern is that IRS would say, "that's 2015 and 2016 taxes.. tough!" Am I right? Thanks again.

nelsona
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Re: RRIF Witholding Surprise

Post by nelsona » Sat May 02, 2020 3:40 pm

The problem with claiming them in 2020, is that they can only be claimed as a deduction on schedule A, since I'm quite sure you would not have sufficient other Cdn income in 2020 that would use this as a credit.

Since it is based on a foreign "reassessment" you probably can open up those previous returns, and amend the 1116's that you submitted. However, if you look back at your returns, I'm sure you noticed that only a portion of your Cdn ta was used then, even at 15% withholding, so adding more tax to that will simply increase your carryforward, not lower your US taxation.

That is why it is crucial to pay as little Cdn tax as possible on your Cdn income, which is why CAREFUL withdrawals over a long period of time, periodic, keep the Cdn tax at 15%, and mesh better with the US tax liability on those payments.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nelsona
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Re: RRIF Witholding Surprise

Post by nelsona » Sat May 02, 2020 3:58 pm

You can go back and amend an older return (10 yrs) for a redetermination of foreign tax liability.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Philmbrown
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Joined: Fri Apr 24, 2020 3:00 pm

Re: RRIF Witholding Surprise

Post by Philmbrown » Sun May 03, 2020 9:04 am

Nelsona, thanks again for the direction. I will proceed to pay CRA and paddle on from there.

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