CRA Confirms Availability of RRIF Withdrawal Reduction for 2008

Recent events in Ottawa have created considerable uncertainty around the status of measures announced in last month's Economic Update with respect to reductions in required RRIF withdrawals for the 2008 tax year.

The Canada Revenue Agency has issued a news release confirming that RRIF holders will be entitled to reduce their 2008  minimum withdrawals by 25%. Thus, a planholder who was required to withdraw $10,000 may (but is not required to) reduce that withdrawal to $7,500, for 2008 only. The CRA release also confirmed that where affected taxpayers have already made  withdrawals greater than those required under the new rules, they will have until  the later of March 1, 2009, or 30 days after the implementing legislation is passed to recontribute any "excess" amount to their RRIFs, without tax or penalty.

The CRA indicated that financial institutions can administer the proposed change before the law is passed and that it would work with financial institutions to ensure that individuals are able to avail themselves of the proposed change for 2008. Finally, the CRA stated that if RRIF holders or financial institutions act in good faith on the basis of a proposal that is then not passed into law, no penalty will be assessed  for those actions.

The CRA's news release can be found on the (Click here...)