An employee in Ontario was paid a $25,000.

A retiring allowance is treated as a lump-sum payment for payroll withholding purposes. When part of a retiring allowance is transferred directly to an RRSP/RPP, CRA guidance indicates you do not withhold income tax on the transferred amount (up to the employee’s available limit), because it is not paid to the employee in cash.

Step 1: Determine the portion paid directly to the employee (non-eligible portion):

$25,000 − $15,000 transferred to RRSP = $10,000 paid/remaining.

Step 2: Apply CRA lump-sum withholding rates (outside Quebec):

For total lump-sum payments $5,001 to $15,000, the withholding rate is 20%.

Step 3: Calculate tax to withhold on $10,000:

$10,000 × 20% = $2,000.00.

So the correct option is B ($2,000.00).