Contingent Tax on RRSP

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T

Technodaddy

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HI,

What is contingent tax on RRSPs and does it have to be included in your financial statement?

What % can be used? Is it based on your income today or when you retire?

Thanks.

TD
 
I had to Revenue Canada this recenlty. It all depends. Call them there are variables. The tax is basically if you have to withdrew the money now. i want to say it is 6 per but I cannot remembe it was like 6 or 12 per penalty if you have to take the money out early.
 
It is based on what you think your marginal tax rate will be when you collapse the RRSP.
My lawyer instructed me that the courts generally will allow anywhere from 18% to 24% based on your income.
Talk to an accountant would be my best advice.
 
scared1 said:
I had to Revenue Canada this recenlty. It all depends. Call them there are variables. The tax is basically if you have to withdrew the money now. i want to say it is 6 per but I cannot remembe it was like 6 or 12 per penalty if you have to take the money out early.
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Completely incorrect. What a joke. Don't listen to her. As with most of the other rambling incoherent posts she makes, she doesn't know what she's talking about.

She might be vaguely referring to early retirement penalties on IRA's in the US. An IRA is the US equivalent to our RRSP. They impose early withdrawal penalties down there in addition to the income tax that is levied on the withdrawal.
 
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I used my estimated rate on retirement, which was 25%. As there was lots of other inputs/variables in our equalization, it was not an area that my ex's lawyer chose to fasten in on and lie about to the judge :), unlike some of the other laughable claims they made, which went nowhere.
 
Thanks for all the replies.

Can you NOT agree to have this in your financial statement.
My ex is trying to bump hers up to 35%.

Thus giving herself more to deductand to increase the equalization payment in her favor.

I called REV Canada to get an official statement. No call back yet. I will be sure to challenge this.

So is this a speculation for when you retire and flip your RRSP to RRIF?

Will also consult a accountant.
 
I'm a tax accountant. The CRA will not give you any advice on this issue, as they don't know what your marginal rate will be when you retire.

Run the effect on the equalization payment using 25% as well, and then you will know how much this will affect things. It may or not be worth arguing about.

35% is a rate that would apply to income above around $75K. Will her pension and other income be at least this much when she retires? If so, it's not unreasonable.
 
dadtotheend said:
Completely incorrect. What a joke. Don't listen to her. As with most of the other rambling incoherent posts she makes, she doesn't know what she's talking about.

She might be vaguely referring to early retirement penalties on IRA's in the US. An IRA is the US equivalent to our RRSP. They impose early withdrawal penalties down there in addition to the income tax that is levied on the withdrawal.
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No. Call them. THe 18 to 24 is what most can legally deduct from their income in Canada. WHy the heck would i post 401 k info. Duh.

As coborg notied it is when you take money out of it. You pay a lesser amt. I am entitled to 50 percent, any spouse is to to get an avg of how much would be lost if i get a lump sum, new rules in affect this year there, I asked them what the penalties are.

Revenue Canada and the IRS are not the same. Come on dad. Get serious.

The penalty dad in the us IS 31 percent. They do not like you touch that money since it is tax free.

RRSP - Making withdrawals - Withdrawing from your own RRSP

This is not the best place to ask because it all depends on the type of rrsp. Contact us - Telephone numbers
 
Dad they do not tell you but you figure out with the forms and amt you have. You do not need an accountant and if you cash out it for a divorce or lump sump you still have to figure this out. There is a percentage but it can vary if it is your rsp or spousal rsp.
 
scared1 said:
Dad they do not tell you but you figure out with the forms and amt you have. You do not need an accountant and if you cash out it for a divorce or lump sump you still have to figure this out. There is a percentage but it can vary if it is your rsp or spousal rsp.
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OK, I'm only a tax expert. What do I know?
 
How is it possible to claim a tax credit on money you have not cashed out of rrsp?

Very confused on this one.

Far as I can see it should not be included and will agrue that point.
 
The link I posted explains it very well. Ignore scared1 - she is confusing everything. Make sure you understand first before arguing it.
 
Techno, it's like this. I have $1000 in a savings account. I take it out of the savings account then it's $1000 in my hands.

You have $1000 in an RRSP. You take it out of the RRSP and it is taxed as though it is income, so it's not $1000, it's more like $750-800 depending on your tax bracket.

When you compare my savings and your RRSP for equalization, I would owe you the difference.
 
That's right Mess. Techno, one has to look at the after-tax funds in hand and there are taxes to pay on the RRSP withdrawal.
 
example calculation

example calculation

Presuming that $ 100K is to be split between 2 parties (party A currently holds the asset, and in retirement Party A 's tax rate will be greater than Party B's tax rate should the $ 100 K

a) have a rate of 25% contingent tax applied to it i.e $ 75K and then split be 50/50
or
b) have a two different rates of contingent tax applied to the $ 100K each and to determine the net equalization value e.g $ Party A 55K / Party B $ 45K split
 
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