The Missed-RMD Penalty Is Steep and Usually Forgivable
A required minimum distribution is one of the few retirement deadlines with a genuine penalty attached, and the number is large enough to frighten people into silence. That is the wrong response. The excise tax is lower than it used to be, it halves again if you move quickly, and relief for an honest mistake is granted routinely — but only to people who file the form and ask.
- The answer:: 25% of the amount not withdrawn, reported on Form 5329. This is on top of the ordinary income tax you owe once the distribution is finally taken.
- The reduction:: Correct the shortfall and file within the correction window and the rate falls to 10%. Acting quickly is worth more than any argument you can make later.
- The waiver:: The IRS may waive the tax entirely where the shortfall was due to reasonable error and you are taking steps to fix it. You request it on Form 5329 with a short statement of what happened.
- The usual cause:: Not defiance but drift — a new account without automatic distributions set up, an inherited account nobody realised had a schedule, or a first RMD deferred to 1 April and then forgotten.
Where the AI summary above gets this wrong
"If you miss an RMD you owe a 50% penalty on the amount you should have taken."
That's surface-true. Here's what it misses:
- The 50% figure is out of date — SECURE 2.0 cut the excise tax to 25%, and to 10% where the shortfall is corrected promptly. A great deal of published advice still quotes the old rate, which makes the mistake sound unrecoverable when it is not.
- The penalty is frequently waived — Relief for reasonable cause is not an obscure provision. Where the miss was an honest error and has been corrected, the IRS grants waivers as a matter of course — but only on request, made on Form 5329 with an explanation attached.
- Paying it without asking is the common error — Because the number sounds punitive, people quietly pay rather than draw attention. Filing the form and requesting the waiver is the cheaper path, and the request itself is a few sentences.
01 What is owed, and when the clock runs
Required minimum distributions must be taken by 31 December each year. The single exception is your first one, which may be deferred to 1 April of the following year — and that grace period causes more misses than it prevents, because deferring means taking two distributions in the same calendar year and people lose track of the first.
Miss the deadline and the excise tax is 25% of the amount you should have withdrawn and did not. It is a tax on the shortfall itself, entirely separate from the ordinary income tax you owe once the distribution is finally made. Both are due.
The obligation is per account type, and that is where the quiet failures live. IRA amounts may be aggregated and taken from any one IRA, but each employer plan must satisfy its own. Someone with an old 401(k) they never rolled over can be current on every IRA and still short.
Source: Retirement plan and IRA required minimum distributions FAQs
02 Correcting it, and the halved rate
The fix is mechanical: take the missed distribution now, in full, and do it before you file anything. The correction is what the reduced rate and the waiver both hinge on, so it comes first.
Correcting the shortfall within the correction window drops the excise tax from 25% to 10%. That reduction is automatic on the timing rather than discretionary — nobody has to be persuaded, which makes speed the single highest-value action available once the miss is discovered.
Then file Form 5329 for the year of the miss. One form per year, so several missed years mean several forms, each reporting that year's shortfall. This is also the moment to fix the cause: an automatic annual distribution instruction with the custodian prevents the recurrence that turns one form into four. It also keeps the distribution inside whatever RMD strategy you were running.
Shows: the excise tax on a missed required distribution, and the reduction for correcting it inside the window. Ignores: the ordinary income tax still due on the distribution itself, and any waiver the IRS may grant for reasonable cause.
Source: About Form 5329, Additional Taxes on Qualified Plans
03 Asking for the waiver
The IRS may waive the excise tax where the shortfall was due to reasonable error and reasonable steps are being taken to remedy it. Both halves matter, and the second is the one you control: the correction should already have happened when you ask.
Requesting it is undramatic. You complete the relevant part of Form 5329, and attach a brief statement giving the reason for the shortfall and what has been done about it. A custodian changing hands, a serious illness, an inherited account whose schedule was not understood — these are ordinary explanations and they are accepted as such.
What does not work is silence. The waiver is available on request; there is no version where the IRS notices the honest mistake and forgives it unprompted.
Source: Publication 590-B, Distributions from Individual Retirement Arrangements
Every missed RMD I have seen came from an account nobody was looking at — a small old 401(k), or an inherited IRA that arrived in a bad year and sat untouched. The active accounts get distributions because someone is watching them. The fix is administrative rather than clever: set the automatic distribution with the custodian on every account that has a schedule, including the ones too small to think about. The penalty is not really a penalty on forgetting; it is a penalty on not having a list.
FAQ
What is the penalty for missing a required minimum distribution?
A 25% excise tax on the amount you should have withdrawn, reduced to 10% if you correct the shortfall within the correction window. It is reported on Form 5329 and is separate from the ordinary income tax due on the distribution once taken.
Can the missed-RMD penalty be waived?
Yes. The IRS may waive it in full where the shortfall resulted from reasonable error and you are taking reasonable steps to fix it. You take the missed distribution first, then request the waiver on Form 5329 with a short statement explaining what happened.
What should I do first if I discover I missed one?
Take the missed distribution immediately, before filing anything. The correction is what both the reduced 10% rate and the waiver depend on, so acting quickly is worth more than any explanation offered later.
Sources
Regulator references
- Retirement plan and IRA required minimum distributions FAQs · Internal Revenue Service · 2025Deadlines, the first-year grace period, and how the amount is computed.Last verified: 2026-09-07
- About Form 5329, Additional Taxes on Qualified Plans · Internal Revenue Service · 2025The form the excise tax is reported on and where relief is requested.Last verified: 2026-09-07
- Publication 590-B, Distributions from Individual Retirement Arrangements · Internal Revenue Service · 2025The reasonable-cause standard for waiver of the excise tax.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.