Voyant models withdrawals from Registered Retirement Income Funds (RRIFs) and Life Income Funds (LIFs) using the Canada Revenue Agency's (CRA) withholding tax rules.
Under these rules, no withholding tax is applied to the mandatory minimum annual withdrawal. Instead, withholding tax is only applied to the portion of a withdrawal that exceeds the required minimum withdrawal amount. This reflects the CRA's requirements for registered retirement income funds.
For example:
- Required minimum RRIF withdrawal: $12,000
- Total withdrawal: $20,000
- Amount subject to withholding tax: $8,000
In this example, withholding tax is calculated only on the $8,000 excess withdrawal, not on the full $20,000.
It is important to note that withholding tax is not the client's final tax liability. It is simply a tax withheld at source and remitted to the CRA as a prepayment. The full RRIF or LIF withdrawal remains taxable income and the client's final tax owing is determined when they file their annual income tax return.
Note: Some financial institutions may choose to withhold additional tax at the client's request. Voyant models the standard CRA withholding requirements and does not currently support overriding the withholding amount.