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December 1, 2007

Tax Alert Warning: Investing in schemes that promise you tax-free withdrawals from RRSPs and RRIFs could result in you losing your retirement savings

According to a tax alert issued by the Canada Revenue Agency, the CRA is finding an increasing number of questionable Registered Retirement Savings Plan (RRSP) and Registered Retirement Income Fund (RRIF) tax-free withdrawal schemes. As such, the CRA is warning Canadians that "investing in such schemes could result in you losing your entire retirement savings to unscrupulous promoters and in a reassessment of your tax returns."


Stats and Facts
- To date, the CRA has reassessed over 3,100 taxpayers who participated in these schemes resulting in additional taxable income of approximately $144 million.
- Audits of another 1,800 taxpayers with $84 million in RRSP and RRIF investments are currently underway.
- Audits on other arrangements are about to begin.

Questionable RRSP/RRIF schemes
Taxpayers should avoid schemes that promise the following:

- Withdrawal of funds from an RRSP or RRIF without paying tax. Promoters often promise to return part of the taxpayer's investment by offshore debit or credit cards, offshore bank accounts, or loan-back arrangements;
- Immediate access to assets in “locked-in” RRSPs or RRIFs;
- Income tax deductions of three or more times the amount invested in an RRSP;
- Unrealistic returns on investments.

For more information on this tax alert, please see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/alerts/2007/a071129-e.html

Posted by Taxes.ca Editorial Team [permalink]

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