A client calls in a mild panic. They forgot to take a required minimum distribution last year, and somewhere online they read the penalty is 50% of the missed amount. They want to know how bad the damage really is.
The real number is better news, and worse news, than that. For tax years beginning after December 29, 2022, the base penalty for a missed RMD is 25%, not 50%. It can drop to 10% if the shortfall is corrected inside a specific legal window, or be waived entirely for reasonable error.
Qualifying for the lower rate depends on getting a few details exactly right, and most explanations online get at least one of them wrong.
This guide covers the actual rule under IRC Section 4974, which tax year (and therefore which rate and which Form 5329) applies to a delayed first RMD, the correction window that earns the 10% rate, the current RMD age rules under SECURE 2.0, how to calculate the distribution itself, and where the inherited IRA rules stand for 2025 and 2026.
A required minimum distribution is the amount the IRS requires an account owner, or a beneficiary of an inherited account, to withdraw from a retirement account each year. Skipping it, or withdrawing less than required, triggers an excise tax under Section 4974.
The statute imposes a tax equal to 25 percent of the amount by which the required distribution exceeds what was actually distributed. Section 302 of the SECURE 2.0 Act made that change from 50 percent for taxable years beginning after December 29, 2022, as IRS Notice 2023-54 confirms.
The word that matters is "taxable year." The Form 5329 instructions say the tax is due for the tax year that includes the last day by which the minimum required distribution must be taken. The deadline year sets the rate, the form year, and the correction window.
For most owners that is the same year as the RMD. For someone who delays a first RMD to April 1, it is the following year, because Treasury Regulation Section 54.4974-1(f) treats the missed April 1 payment as the RMD for the prior calendar year, while the Form 5329 instructions tie the tax to the year the deadline falls in.
A shortfall whose deadline fell in 2022 or earlier still carries the old 50% rate. That is why "2022 means 50%" is not a safe shortcut: a first RMD for 2022 was not due until April 1, 2023, and it lands on the 25% side of the line.
Most explanations stop at "25%, or 10% if you fix it fast." There are actually three possible results, and they are pursued together rather than one after another:
Section 4974(e) sets out what earns the 10% rate, and it takes two steps, not one. During the correction window, the taxpayer must:
Taking the missed distribution without filing a return that reports the tax does not qualify. Both steps have to happen inside the window.
The correction window ends at the earliest of three events: the IRS mails a notice of deficiency for the tax, the IRS assesses the tax, or the last day of the second taxable year that begins after the end of the year the tax is imposed. Notice 2023-54 summarizes that last date as generally the end of the second year that begins after the year of the missed distribution.
The statute measures from the year the tax is imposed, which is why the delayed-first-RMD row in the table above runs a year longer. Because a deficiency notice or an assessment can close the window early, waiting on the IRS to respond before taking the corrective distribution is a mistake.
The corrective distribution has to come from the same plan the tax relates to. The Form 5329 instructions build in the flexibility that already exists for RMD calculations: an owner figures the RMD separately for each traditional, SEP, and SIMPLE IRA but can withdraw the total from any one or more of them, and 403(b) contracts can be totaled the same way.
That means an owner with several IRAs can generally make the correction from whichever of them fits. Inherited IRAs aggregate only with other IRAs inherited from the same decedent, and qualified plans such as a 401(k) do not aggregate at all, so each plan's shortfall has to be corrected from that specific plan.
The fix has two parts. First, take the missed distribution as soon as the shortfall is found. Second, file Form 5329 for the year the tax is imposed, using the prior-year version of the form if that year has already passed.
Part IX of the current form is where the shortfall and any relief request are reported:
Treat the missed year and the current year as two separate calculations. The current year's RMD still has its own deadline, and the corrective distribution is reported for the missed year under the Form 5329 rules above, which is why lines 53a and 53b exclude late and corrective distributions.
Keep a dated record showing which withdrawal was the correction and which was the current year's RMD. Sorting that out after the fact, especially across several accounts, is where owners get tripped up.
Section 4974(d) lets the IRS waive part or all of the tax if the shortfall was due to reasonable error and the account owner is taking reasonable steps to fix it. The Form 5329 instructions walk through the request: write "RC" and the amount to be waived in parentheses on the dotted line next to line 54a or 54b, subtract that amount from the shortfall, enter the result on line 54, and complete line 55.
The owner still pays any tax reported on line 55. The IRS reviews the statement and, if it declines the request, notifies the owner of any additional tax owed on the shortfall.
A defensible reasonable-cause statement is signed, dated, and specific. It should cover:
Attach supporting records where they exist, such as medical documentation, custodian correspondence, or statements showing the correction date. Bizora's guide to writing a tax research memo covers structuring an explanation around the facts and the citations that support it.
The rate on whatever the IRS does not waive depends on the correction window, so the corrective distribution and the return both need to land inside it whether or not the waiver is granted. That is the practical reason to take the distribution and file at the same time, and to treat the waiver request as an add-on rather than a reason to wait.
SECURE 2.0 raised the RMD age twice: to 73 for people who reach 72 after 2022, and to 75 for people who attain 74 after 2032. The exact cutoff depends on birth year, and this is where a lot of retirement content goes stale, since the age-75 change is often described as starting in 2033 when it does not apply to anyone's first RMD until 2035.
The statute's wording created a genuine drafting problem for people born in 1959, who read literally could fall under either age 73 or age 75. The final regulations, published in the Federal Register in July 2024, assign ages by birth date for everyone else and reserve the 1959 question for later rulemaking.
The IRS's stated position, in the proposed regulations, is that age 73 applies. Those proposals are not final, and Announcement 2026-7 pushes the applicability of parts of the 2024 proposals back to a distribution year beginning at least six months after final rules are issued, with taxpayers applying a reasonable good-faith reading of the statute in the meantime. In practice, everyone born in 1959 plans around age 73, and age 75 applies cleanly only to people born in 1960 or later, whose first RMD year is 2035.
The first RMD is due by April 1 of the year after reaching RMD age, a date the IRS calls the required beginning date. Every RMD after that is due by December 31 of that year.
Delaying the first RMD to April 1 means the second RMD is still due that same December 31, which puts two taxable distributions into one tax year. The IRS's own RMD FAQs give the example of someone who reached age 73 in 2024: the first RMD was due April 1, 2025, and the second by December 31, 2025.
Taking the first RMD by December 31 of the year you actually reach RMD age avoids stacking two distributions in one year, which can push income into a higher bracket or trigger Medicare premium surcharges. Bizora's guide to the 2026 standard versus itemized decision covers the deduction side of that same year's math.
The formula is straightforward: divide the account balance as of December 31 of the prior year by a distribution period from an IRS life expectancy table. The tables live in Publication 590-B.
Most account owners use the Uniform Lifetime Table. The distribution period shrinks as you age, from 27.4 at age 72 to 26.5 at 73 and 24.6 at 75, so the RMD is a growing share of the balance each year.
An IRA owner turned 73 in 2025, with a December 31, 2024 balance of $400,000. Dividing $400,000 by the age-73 divisor of 26.5 gives an RMD of $15,094.
The exception is an owner whose spouse is the sole beneficiary for the entire year and is more than 10 years younger. That combination uses the Joint and Last Survivor Table, which produces a smaller RMD. Beneficiaries of inherited accounts use a separate Single Life Table, covered below.
IRA owners calculate the RMD separately for each traditional, SEP, and SIMPLE IRA but can withdraw the combined total from any one or more of them. Employer plans like 401(k)s do not get that flexibility, so each plan's RMD has to come from that plan.
The SECURE Act replaced the old stretch IRA for most non-spouse beneficiaries with a 10-year rule: the entire account has to be emptied by the end of the 10th year after the owner's death. Eligible designated beneficiaries, a group that includes surviving spouses, minor children of the owner, and disabled or chronically ill individuals, generally keep the life-expectancy option instead.
Since 2025, whether annual withdrawals are required during the 10 years depends on when the original owner died relative to their own required beginning date:
The IRS waived the excise tax on these annual RMDs for 2021 through 2024 while the regulations were being finalized, most recently in Notice 2024-35. That relief ended with 2024, and the final regulations apply beginning with 2025.
A beneficiary who owed an annual RMD in 2025 and missed it falls under the same 25% and 10% structure described above. A missed RMD covered by the 2021 to 2024 relief did not have to be made up and carried no penalty.
SECURE 2.0 changed how long the IRS has to assess the Section 4974 tax on a missed IRA RMD. Under Section 6501(l)(3), the income tax return filed for the year of the failure now counts as the return that starts the standard three-year assessment clock, even if Form 5329 itself was never filed.
Under the older rule, an unreported RMD failure could stay open indefinitely. It is still worth filing Form 5329 directly: the protection applies to IRAs, and the form is the clearest evidence of a good-faith correction.
The math on a missed RMD is rarely the hard part. The tax year that sets the rate, the same-plan requirement, and the difference between taking the distribution and taking it while also filing the return are where corrections fail, and where a shortfall that should have cost 10% ends up costing 25%.
Those are worth checking against the regulation itself rather than a summary, since one missed detail in the correction window decides which rate applies. Bizora AI traces answers back to the specific Code section, Treasury regulation, or IRS notice behind them, so the citation is something you can check directly. Try it on your next RMD question with the 7-day free trial, no credit card required, at Bizora AI.
The same discipline applies to the other retiree tax questions that surface the same season, like which health insurance premiums are deductible in retirement.
The penalty is 25% of the amount that should have been withdrawn but wasn't, under IRC Section 4974, for taxable years beginning after December 29, 2022. The tax year is the one that includes the RMD deadline, so a shortfall whose deadline fell in 2022 or earlier is taxed at the old 50% rate.
Take the missed amount from the same plan the shortfall relates to, and submit a return reporting the tax, both before the correction window closes. The window generally ends on the last day of the second taxable year that begins after the year the tax is imposed, or sooner if the IRS mails a deficiency notice or assesses the tax first.
Yes. The IRS can waive the tax if the shortfall was due to reasonable error and the owner is taking reasonable steps to fix it. On Form 5329, write "RC" and the amount to be waived in parentheses next to the shortfall line, subtract it, and attach a signed statement explaining what happened.
File the form for the tax year that includes the last day by which the RMD had to be taken. For an ordinary annual RMD that is the RMD year. For a first RMD delayed to April 1, it is the following year, so a missed 2025 first RMD goes on the 2026 Form 5329.
RMD age is 73 for anyone born from 1951 through 1959, and 75 for anyone born in 1960 or later, whose first age-75 RMD year is 2035. The first RMD is due by April 1 of the year after reaching that age. Every RMD after it, including the second one in a delayed-first-RMD year, is due by December 31.
Divide the account balance as of December 31 of the prior year by the distribution period for your age in the IRS Uniform Lifetime Table. A 73-year-old with a $400,000 prior year-end balance divides by 26.5, for an RMD of $15,094. Owners with a spouse more than 10 years younger use a different table.
Yes, for most non-spouse designated beneficiaries. Since 2025, annual RMDs in years one through nine also apply when the original owner died on or after their own required beginning date. Eligible designated beneficiaries, such as a surviving spouse, and beneficiaries of an owner who died before that date, follow different payout rules.
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