When making contributions into an IRA, you are designating the money as long-term savings for retirement. The IRS gives IRAs special tax considerations; traditional IRAs deduct contributions from income and defer taxes until distribution, while Roth IRAs don't deduct contributions but grow tax free. There are a few ways to cancel your IRA: close it out and take the money; re-characterize a Roth conversion; or stop automatic contributions.
Close the IRA
Contact your plan administrator and request a distribution form.
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Fill out the form, electing a complete withdrawal. Note there is an automatic 20 percent withholding for distributions along with a 10 percent penalty assessed if you are not yet 59 1/2 years of age.
Submit the form and wait for your check to arrive.
Re-characterize a Roth Conversion
Determine if you are eligible for a re-characterization. Re-characterization of a Roth IRA takes the money you converted from a traditional IRA into a Roth IRA and places it back into a traditional IRA. To qualify, you must not have passed the filing deadline for your tax returns (including extensions) in the year you converted the funds. So if you converted in 2009, your tax return would normally be due on April 15, making this the deadline to re-characterize.
Contact your IRA plan administrator to obtain "re-characterization paperwork." Fill out the paperwork and submit it prior to the deadline.
File IRS Form 8606 with your taxes. Line 8 pertains to the amount re-characterized.
Stop Automatic Contributions
Contact your IRA custodian and request paperwork to stop automatic contributions coming from a checking or savings account. Automatic contributions are popular for those who don't want to come up with a large lump sum contribution at the end of the year. Depending on the IRA custodian, you may make regular contributions as little as $25 per month.
Fill out the paperwork, sign it and submit it.
Confirm with your bank that the contributions have stopped. Check your bank statement on the date that the withdrawal is normally taken for the distribution.
Failure to properly comply with IRS regulations may result in tax penalties. Consult a tax adviser prior to making any changes to your IRA contributions or distributions.