RMD- Potential Penalty Abatement Strategies

July 13th, 2026 at 7:08 AM

If you own a traditional IRA, failing to take your required minimum distribution (RMD) can cost you far more than taking it and paying the associated income tax.

Owners of traditional IRAs, SEP IRAs, and SIMPLE IRAs generally must begin taking RMDs the year they reach age 73. (Roth IRA owners are not subject to lifetime RMDs.) You may delay your first RMD until April 1 of the following year, but all subsequent RMDs must be taken by December 31 each year.

Missing an RMD—or withdrawing less than the required amount—can trigger one of the steepest penalties in the tax code. The IRS may assess an excess accumulation penalty equal to 25 percent of the amount not withdrawn. For example, if your RMD is $50,000 and you withdraw only $30,000, you could owe a $5,000 penalty on the $20,000 shortfall.

Fortunately, you can reduce the penalty to 10 percent by correcting the shortfall within the IRS correction window. In most cases, you must withdraw the missed amount by the end of the second calendar year following the year in which you missed the RMD.

You may even qualify for a complete penalty waiver. The IRS often waives the penalty if you can show that the shortfall resulted from a reasonable error and that you have taken steps to correct the problem and prevent it from happening again.

To request a waiver, withdraw the missed RMD and file IRS Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts. Attach a signed statement explaining why you missed the distribution and describing the steps you have taken to avoid future errors.

Acceptable explanations may include a serious illness, a family emergency, a custodial error, or a misunderstanding of the first-year RMD rules. Preventive measures might include establishing automatic RMD withdrawals or reviewing your annual RMD calculation with your IRA custodian.

The IRS frequently grants a waiver when a taxpayer misses an RMD for the first time and promptly corrects the mistake.

Mark S. Fineberg, CPA