The Income Tax Act stipulates that withdrawals of retirement funds must be included in a taxpayer's income, and the amounts withdrawn are subject to withholdings of 10 per cent to 30 per cent for income taxes, according to Howard Sone, Partner, Sone & Rovet in North York.
"Be careful of promoters who advertise -'Take advantage of your RRSP now - no tax to pay.' They will present a complicated financing scheme that involves using your self-directed RRSP funds to purchase shares of a private company. The funds used to purchase these shares are then loaned back to you at a low or no interest rate. However, there are no rules and regulations in the Income Tax Act that permit this or similar schemes. The amount withdrawn for such a purchase will be subject to income taxes by the taxpayer," cautions Sone.
Canada Revenue Agency has issued a warning to the public about these and other types of schemes and can be found under "Debunking Tax Myths" on the CRA website (www.cra-arc.gc.ca).
Sone warns taxpayers that, if it sounds too good to be true, it is too good to be true! So be cautious!
Courtesy of Institute of Chartered Accountants of Ontario.
Tax-free withdrawal from my Self-Directed RRSP
The Income Tax Act stipulates that withdrawals of retirement funds must be included in a taxpayer's income, and the amounts withdrawn are subject to withholdings of 10 per cent to 30 per cent for income taxes, according to Howard Sone, Partner, Sone & Rovet in North York.
"Be careful of promoters who advertise -'Take advantage of your RRSP now - no tax to pay.' They will present a complicated financing scheme that involves using your self-directed RRSP funds to purchase shares of a private company. The funds used to purchase these shares are then loaned back to you at a low or no interest rate. However, there are no rules and regulations in the Income Tax Act that permit this or similar schemes. The amount withdrawn for such a purchase will be subject to income taxes by the taxpayer," cautions Sone.
Canada Revenue Agency has issued a warning to the public about these and other types of schemes and can be found under "Debunking Tax Myths" on the CRA website (www.cra-arc.gc.ca).
Sone warns taxpayers that, if it sounds too good to be true, it is too good to be true! So be cautious!
Courtesy of Institute of Chartered Accountants of Ontario.