How Late Can I Take My RMD Without Facing Penalties?
Understand the deadlines, penalties, and options for reporting or requesting a waiver if you miss your Required Minimum Distribution (RMD).
Required Minimum Distributions (RMDs) are mandatory withdrawals from certain retirement accounts to ensure taxes are eventually paid on tax-deferred savings. Missing an RMD deadline can result in significant penalties, making it essential to understand the rules and deadlines.
Missing a deadline doesn’t always mean an automatic penalty if corrective steps are taken. Understanding how late you can take an RMD and what options exist for addressing a missed withdrawal can help minimize financial consequences.
Deadline Requirements
The deadline for taking an RMD depends on the account holder’s age and retirement status. Under the SECURE 2.0 Act, which took effect in 2023, individuals must take their first RMD by April 1 of the year following the year they turn 73. Previously, the threshold was 72. After the first withdrawal, all subsequent RMDs must be taken by December 31 each year.
An exception applies to individuals still working at 73 who participate in an employer-sponsored retirement plan. If the plan allows it, those who own 5% or less of the company can delay RMDs from that plan until April 1 of the year after they retire. However, this exception does not apply to IRAs, which require distributions regardless of employment status.
The IRS determines RMD amounts using a Uniform Lifetime Table, which calculates distributions based on life expectancy and the account balance as of December 31 of the prior year. Failing to withdraw the full required amount by the deadline can result in penalties.
Penalties for Late RMD
Failing to take an RMD on time can result in an excise tax of 25% on the shortfall. For example, if an individual was required to withdraw $10,000 but failed to do so, the penalty would be $2,500. This is a reduction from the previous 50% penalty but remains one of the highest in the tax code.
If corrected promptly, the penalty may be reduced to 10%. To qualify, the full missed amount must be withdrawn, and IRS Form 5329 must be filed within the correction window. While the IRS has not specified an exact timeframe, acting quickly increases the likelihood of receiving the lower penalty.
Repeated failures to take RMDs can attract IRS scrutiny, potentially leading to audits or additional compliance checks. Retirement account custodians report RMDs to the IRS, making it difficult to avoid detection.
Reporting a Late Distribution
A missed RMD must be reported to the IRS to prevent further complications. This is done by filing IRS Form 5329, which discloses the shortfall and calculates any excise tax owed. Unlike many tax forms that financial institutions generate, Form 5329 is the account holder’s responsibility and must be filed even if a tax professional prepares the return.
On Form 5329, the missed distribution amount is entered on Line 52 under “Excess Accumulations.” The penalty is calculated at the applicable rate and reported on Line 53. If the missed RMD has already been taken, an explanation should be attached. While the form does not have a designated space for this, a written statement can be included, detailing the reason for the delay and the corrective action taken.
Tax software may not automatically prompt users to complete Form 5329, so individuals filing their own returns should ensure it is included if an RMD was missed. If the oversight is discovered after filing, an amended return using Form 1040-X may be required, with Form 5329 attached, along with any supporting documentation.
Requesting a Penalty Waiver
The IRS allows individuals to request a waiver of the excise tax if the missed RMD was due to a reasonable error and has been corrected. While approval is not guaranteed, the IRS has historically been lenient in cases where the mistake was unintentional and promptly addressed. Common reasons for missing an RMD include serious illness, financial institution errors, or confusion over rule changes. Providing supporting documentation, such as correspondence with a plan administrator or medical records, can strengthen a waiver request.
To request relief, taxpayers must complete Form 5329 but leave the penalty calculation line blank. Instead of paying the excise tax, they should attach a written explanation outlining the circumstances that led to the missed RMD and the corrective actions taken. The statement should include details such as the date the missed amount was withdrawn and any interactions with financial institutions regarding the mistake. If the waiver is granted, the IRS will not issue a formal approval notice but will simply refrain from assessing the penalty.