Before you find out how to cash in an SEP retirement account, make sure you understand the penalties and tax implications that can result from withdrawing your funds. An SEP, or Simplified Employee Pension, retirement account should not be cashed in unless it is absolutely necessary to have the money. Consult a tax specialist if you do not fully understand the costs associated with cashing in the account.
- If you have definitely decided to cash in an SEP retirement account, find out what fees are required in order to receive the funds. If your SEP has an administrator, you can contact them to find out the procedure. Ask them what the up front cost is that you will have to pay. For example, there may be commissions for the sale of stocks you have in your SEP plan.
- There are some exceptions to the 10% penalty. For example, if you are cashing in your SEP to use the funds for the purchase of a home, when you are a first-time home buyer there is no penalty. Make sure to do some research to find out if your reasons for cashing in an SEP retirement account qualify for the 10% exception.
- Calculate the taxes you will have to pay to cash in an SEP retirement account. Since the money that you have contributed to your SEP has never been taxed, you will have to pay taxes on the funds you withdraw. Be sure you include any penalty amount as well, if applicable, when you file your income taxes at the end of the year.
- Research online if you have any questions. There is an abundance of available information online about cashing in an SEP retirement account. Make sure to use a government source if possible, to ensure the information you read is up to date for the current tax year.
- Contact a tax specialist if you are unsure about any of the costs involved in closing an SEP retirement account. It is better to be safe than sorry when you cash in an SEP account. Your tax professional should be able to give you an idea of what the tax ramifications are, which will help you to plan your budget for the expense.