When you decide to find out how to cancel an IRA account, if you have not reached retirement age you may have to pay a penalty for early withdrawal. If you are canceling the account to rollover into a new retirement product, you should be fine. Make sure you allow for any penalty and the additional taxes you will have to pay before you decide to cancel an IRA account.
- You may want to use a loan for the funds you need instead of your IRA. Since an IRA has never been taxed, even if you have reached retirement age you will have to pay tax on the amount you withdrawal. It may be better to take out a loan instead of having to use part of your IRA proceeds to pay for the added taxes.
- If you decide to cancel an IRA account, stop all subsequent deposits. For example, if you have money withheld from your check each pay period for IRA contributions, tell your payroll administrator to cancel the withdrawals. Ask for written confirmation, and follow up to make sure your next paycheck does not include an IRA withdraw.
- Figure the taxes you will have to pay for canceling an IRA account. If you have not already budgeted for the additional taxes, take the amount out of your IRA proceeds to be used for the end of the tax year.
- Make an appointment with your accountant if you need advice. Confirm whether an IRA account cancellation is eligible for an exception if you have not yet reached the required retirement age of 59 1/2. Have the accountant calculate the taxes to be withheld, and make sure you have that amount in reserve for when you file your income taxes.