Financial institutions are required by law to deduct a minimum amount of tax depending upon the amount withdrawn. Withdrawals up to $5,000 are subject to a 10% withholding requirement, $5,000 to $15,000, 20% and 30% thereafter. As the financial institution is not aware of your income sources, it is impossible for them to deduct the exact amount required. The amount deducted may be too little, just right or too much. It will not be known until your tax return is filed. It will be prudent to analyze your tax position prior to making any RRSP withdrawals.
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