If you have a retirement account subject to Required Minimum Distributions (RMDs), you generally must begin taking distributions starting in the year you reach age 73. Your first RMD can be postponed until April 1 of the following year, but after that, all annual RMDs must be taken by December 31.
Keep in mind that special rules may apply to certain 403(b) accounts with contributions made before 1987.
What Happens If You Miss an RMD?
If you don't withdraw your full required minimum distribution by the deadline, the IRS may assess an excise tax on the amount that was not distributed.
- The standard penalty is 25% of the missed RMD amount.
- If you correct the shortfall during the IRS correction window, the penalty may be reduced to 10%.
The sooner you address a missed distribution, the greater your chance of qualifying for the lower penalty amount.
What Is the RMD Correction Window?
The correction window is the period during which you can fix a missed RMD and potentially qualify for the reduced 10% excise tax.
The correction window begins on the original RMD due date and ends on the earlier of:
- The last day of the second tax year following the year the RMD was missed, or
- The date the IRS assesses the excise tax.
If you discover a missed RMD, it's generally a good idea to take the missed distribution as soon as possible.
How Do I Report a Missed RMD?
Missed RMDs are reported on Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts.
Our software supports Form 5329 and will calculate the applicable excise tax based on the information you enter.
Form 5329 Entries for Missed RMDs
Enter the appropriate amounts in the following fields:
- Total minimum required distribution in current year from all qualified plans for which you received a distribution of the full amount of the excess accumulation during the correction window that is subject to 10% tax → Line 52a
- Total minimum required distribution for current year from all other plans subject to 10% tax → Line 53a
- Total minimum required distribution in current year from all qualified plans for which you received a distribution of the full amount of the excess accumulation during the correction window that is subject to 25% tax → Line 52b
- Total minimum required distribution for current year from all other plans subject to 25% tax → Line 53b
The program automatically calculates:
- Line 54a
- Line 54b
- Line 55
based on the amounts entered on Lines 52a through 53b.
Requesting a Penalty Waiver
If you're requesting a waiver, the difference between the required distribution and the amount actually distributed is reported on Lines 53a and 53b with an RC (reasonable cause) notation.
Can the IRS Waive the RMD Penalty?
Yes. If the missed RMD occurred because of a reasonable error and you've taken steps to correct it, the IRS may waive the excise tax entirely.
Common examples of reasonable errors may include:
- Illness or hospitalization
- Incorrect advice from a financial institution
- Administrative or processing errors
- Other circumstances beyond your control
How to Request an RMD Waiver
To request a waiver:
- Complete Form 5329.
- Indicate that you're requesting a waiver.
- Enter the amount of the missed RMD eligible for relief.
- Provide a written explanation describing:
- Why the RMD was missed, and
- What actions you've taken to correct the error.
Our software allows you to enter your explanation and claim the waiver as part of the Form 5329 process.
Key Takeaways
- Most taxpayers must begin taking RMDs at age 73.
- Missing an RMD can result in a 25% excise tax on the undistributed amount.
- Correcting the missed distribution during the correction window may reduce the penalty to 10%.
- Missed RMDs are reported on Form 5329.
- If the missed distribution resulted from a reasonable error, you may request an IRS waiver and potentially avoid the penalty altogether.