While filing my tax return, if I find that I owe taxes to CRA, but I don't have any cash on hand to pay the taxes, then I can withdraw from my RRSP.

Now, if I withdraw money from RRSP, do I first have to pay income tax on the amount withdrawn before I can pay CRA?

2 Answers 2


You can withdraw from your RRSP to pay your taxes. While not necessarily advisable, it is permitted — yet the tax consequences are no different just because you happen to be using the money to pay a prior year's income tax balance due.

When you make the withdrawal from your RRSP, an amount will be withheld towards your income tax for the withdrawal year. Assuming you have other income, then you are likely to owe CRA even more than the amount withheld, because the withdrawal is effectively taxed at your marginal rate. In that case, consider the withholding tax merely a downpayment. You'll figure the final amount due when you file your next income tax return.

e.g. If you were to withdraw money from your RRSP today (in 2015) to pay your 2014 income tax balance due, then on your 2015 income tax return, you'll need to declare the withdrawn amount as income for 2015. You'll get credit for the withholding taxes already paid when you made the withdrawal. Your tax return will indicate how much more you'll need to pay to settle your 2015 taxes. If you then pay your 2015 income tax balance due with an RRSP withdrawal in 2016, then ... repeat.

Better to save up funds elsewhere (e.g. in a bank account, or a TFSA) to cover an anticipated income tax balance owing.


I'll point out that you don't actually have to pay your income taxes on time, just make sure to file on time. You will be charged interest (currently 5% ann., compounded daily). This is no big deal, I know plenty of people who do this.

Note that if they pay you interest you have to report it on your taxes, but if you pay them it's not deductible.

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