Withholding Tax Explained...What Is It & When Does It Apply?

[@millmines7416]

Thanks for the highly informative video series - they are so clear and helpful. I do have a question regarding withholding taxes. They seem quite high when compared to the actual tax owed at the end of the year. I plan to retire at 60 and initially all of my taxable retirement income will be coming from an RRSP. Assume I withdraw $50K then I think withholding tax would be $15K (30%); however, at the end of the year, I think my tax owing on the $50K would only be roughly $8K (I live in Ontario) - does this mean I get $7K as a refund or am I missing something here?

[@MightyRostam]

Hello, could you please explain what withholding tax is exactly? Thank you!

[@ParallelWealth]

It's an amount withheld at source (when you take money out) to pre-pay some of the taxes potentially due. It's much like payroll taxes when you work. Your tax is taken off your cheque and your company remits it to CRA. This is much the same, but when you pull from your RRSP. You are pre-paying taxes. When you go to file your taxes you will see a credit for the amount your pre-paid (withheld). Hope that clears it up.

[@MightyRostam]

@@ParallelWealth Thank you so much for the clear explanation :-)

[@southerncomfort971]

Thank you yet again. These are vey well explained video's But I do find that the information might not be for a person in my income range? I had planned a simple retirement life, where I don't have to worry but am able to do pretty much anything I want to do in my retirement. I am turning 70 this summer (2024) and have been living reasonable well with just my Government allowances, CPP, OAS, Etc. I have not had to draw from RRSP, TFSA, bank accounts etc for my every day life. With that in mind I have not converted my RRSP to a RRIF, because I did not need the extra income? Now I see I could have taken $2000.00 tax free? not only lowering my RRSP and therefore my upcoming minimums? Do you have a series that covers someone closer to my situation. Also I asked on a previous video(2) if the pension credit continues past the age of 71 or 72 year? Seems with my limited time now before being forced to convert to a RRIF and start taking my minimum pay outs, Which will only force me to pay more taxes than I pay now. Will not bring much benefit to me, except to add to my TSFA accounts. Thank you for educated me and everyone else I am sharing with, Great work.

[@ybc8495]

never withholding tax, I donot want lend money to cra interest free

[@bridgetcampbell6629]

I want to thank you VERY much for this informative series and especially for the clear explanations about withholding tax. I watched these videos before meeting with my financial advisor at the bank, and I'm really glad I did. I knew enough to ask about withholding tax, and so we set that up. I don't think she would have mentioned it if I hadn't asked. So big thanks to you!

[@ParallelWealth]

Love hearing these stories!

[@southerncomfort971]

@bridgetcampbell6629 @bridgetcampbell6629 Hi, I closed 2 very small RRSP's to avoid having them sit idle and become just part of my larger RRIF once I have to convert it., Also since CO-VID, my accounts suffered. Unfortunately MY bank did not make me aware of the Pension Credit, Adam talks about and I paid tax on my withdrawals, Which were not much more than the $2000.00 per year. I know in my situation I do not trust anyone. PERIOD, so when it comes to my money Knowing these people will try to benefit from my hard earned monies, I am extremely untrusting of them. Just wanted to share my thoughts with some one and maybe hopefully help others to not make the same mistakes I made. Thanks for listening.

[@JuanitoJrMonteroOrdanza777]

What is Ryukyuan withholding tax sir?

[@BA-in1js]

Hi...Thanks for the video. Just about the withholding tax...is this will be refundable to me at income tax time...I mean I enter the amount that withheld in my tax and it will benefit me like make reduction for me.

[@ParallelWealth]

Yes, it's a tax credit or tax prepayment.

[@BA-in1js]

@@ParallelWealth Thanks for your quick reply. Just to clarify one thing, based on the table you introduced in your video that I can make RRIF even before age 65, let say 62, however the withdrawal percentage will be less....is that right?

[@ParallelWealth]

Correct

[@TheRajmoney]

What if you put thar money back before the end of that tax year?

[@rtel123]

If you have any self discipline, you would put aside the anticipated taxes when you get the money, and get interest on it instead of loaning it to CRA interest free via withholding. However, I sometimes use withholding options to keep my tax owing just under $3000 to avoid mandatory quarterly installments the next year.

[@max0390rip]

What is the definition for withholding agent in Canada tax laws? Withholding agent here in America means any person in custody and control of foreign persons US sourced income.

[@martinmilne5275]

Why would you voluntarily give the government money early by paying more tax than you need to on your minimum? Isn't it better to use your money for a year or 16 months if done in January?

[@brandonhickey7036]

The one issue with a RRIF is that as soon as you transfer your RRSP to a RRIF you forced to take out minimum withdrawals, so you give up flexibility. If you're not planning on taking out large sums monthly, I would argue don't convert to a RRIF until later in life. Whether you pay the withholding tax up front (as you do when you are working), or wait until tax season to be hit with a large income tax statement, your paying the taxes either way. Now I understand if you save/invest those same tax dollars you could gain some interest on this.. However you likely won't be investing these "tax dollars" in high growth investments due to volatility (you don't want those tax dollars gone come tax season). So you'll likely be making 3-6%.. Is that 3-6% worth losing the flexibility of not having to be forced to withdraw minimum balances out of your RRIF? Something to think about

[@jeffmarchand6168]

If I hold US dividend paying stock in my TFSA I pay a 15% witholding tax to US government right. Since there is a tax treaty between Canada and US, can I deduct those taxes paid to Washington from my taxes paid to Ottawa?

[@billm3210]

Your vids are are generally good for explaining but there is no math done. A template source would be nice to input various incomes, credits, deductions to see tax savings under different scenarios.

[@nataschas9552]

Helpful thank you

[@RedPlusTV]

thanks love❤❤❤

[@BYODevices]

For individuals starting an RRSP and wanting to hold US Stocks (ETFs): For tax purposes, is it better to purchase US stocks outright from the US Exchanges for a Registered Account, an RRSP, instead of purchasing Canadian based ETFs that contain US stocks? My Big 6 Cdn bank claims their ETFs avoid unrecoverable tax in "non-registered" accounts by holding their underlying securities directly, allowing for foreign (international) taxes to be claimed. Does this affect an RRSP which is a registered account? So for an RRSP should US stocks only (not international) be bought outright from the US or can they also be purchased with Cdn ETFs that specialize in only US stocks? Thanks.

[@BYODevices]

I found the answer. US Dividends earned in an RRSP are only exempt if they were earned US stocks or US ETFs holding US stocks, that have been purchased directly from US Exchanges. Dividends from Canadian ETFs holding US stocks are not exempt from the 15% US Withholding Tax. Or in other words, your dividends will be subject to the 15% US Withholding Tax.

[@stevekonieczny3122]

You said that there is no withholding tax on $4000., but then said that up to $5000., there's a 10% withholding tax. Did I fail to understand something? Thanks!

[@ParallelWealth]

In that example, $4,000 was your minimum RRIF withdrawal. Withholding tax only applies to amounts above your minimum. So, if you withdraw up to $5,000 over the minimum, there would be a 10% withholding tax. Hope this makes sense!

[@stevekonieczny3122]

@@ParallelWealth Thanks!

[@renod42]

@@ParallelWealth would that withholding be on the entire 5000, or just the 1000 in excess?

[@jt4621]

Withhold tax now or pay that same tax later. No getting out of it.

[@geetbhardwaj3879]

thanks

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