Missed Your RMD? Here Is How the Penalty Works and What to Do

What counts as a missed RMD

A missed RMD is any required minimum distribution that was not taken in full by its deadline, usually December 31 of the distribution year. It counts as a miss whether you took nothing at all or took only part of it. The penalty applies to the shortfall, which is the difference between what the RMD was supposed to be and what you actually took.

The common ways this happens:

• Your first RMD year. If you turned 73 (or the age that applied to you) this year, you may not have realized RMDs had started. (Note: if you turned 73 and are in your very first RMD year, you may have until April 1 of next year to take that first RMD, but that would make you take two distributions next year, so check whether you are in that situation.)
• A new inherited IRA. When you inherit, the RMD obligation starts on a new schedule and the original owner's year-of-death RMD may still be due. Many misses come from not realizing an inherited account has its own RMD.
• Multiple accounts. Your total RMD is calculated per account, but you can usually aggregate and take the total from one account. If you forgot one account's balance when doing the math, the shortfall is still on you.
• Still working, but not for this employer. The still-working exception only applies to the plan of the employer you currently work for, not to your IRAs or old employers' plans.
• Believing the deadline was extended. Deadline relief is rare and narrow. Unless a specific notice covers your exact situation, assume December 31 stands.

If you are not sure whether you owed an RMD at all, that is the first thing to settle, because no RMD means no penalty. The Inherited IRA Guide and the calculator can help you pin down whether you were actually required to take a distribution.

The penalty: 25% of the shortfall

Under current law, the IRS imposes an excise tax of 25% on the RMD shortfall, the amount you were required to take but did not. This is sometimes called the "excess accumulation" tax, and it is reported on IRS Form 5329, filed with your income tax return. It is a separate tax on top of the ordinary income tax you will owe when you take the distribution.

Two points people get wrong:

• It is 25% of the shortfall, not the whole account. If your RMD was $20,000 and you took $5,000, the penalty base is $15,000, not your $400,000 balance and not the full $20,000.
• Before 2023, it was 50%. SECURE 2.0 cut the rate in half. If you are reading older articles that say the penalty is 50%, they are out of date. The calculator on this site models the post-2022 rates.

The 10% reduced rate and the correction window

If you correct the shortfall and report the error within the correction window, the excise tax drops from 25% to 10% of the shortfall. That is the law's way of rewarding prompt cleanup.

Generally, the window ends by the end of the second following tax year, but a deficiency notice or assessment can end it earlier. So if you missed a 2025 RMD, the window generally runs through the end of 2027, unless the IRS sends you a deficiency notice or assesses the tax sooner, which would cut the window short. (IRS Publication 590-B describes how the correction window works; the app's own modeling uses the same framing.)

Practically, this means: the sooner you fix it, the better your outcome. Correcting in the same tax year is ideal. Correcting next year is still well within the window. Waiting for a letter from the IRS is the one move that can make things worse, because the notice can end the window early.

The reasonable-cause waiver: the penalty can be waived entirely

Beyond the 10% reduced rate, the IRS may waive the excise tax entirely if the shortfall was due to reasonable error and reasonable steps are being taken to remedy it. This is not a rare exception; it is the ordinary path for an honest mistake, and it is why panicking helps nothing.

How it works in practice:

1. Take the missed distribution immediately. The waiver contemplates that you are fixing the error, so the distribution itself is step one.
2. Report the shortfall on Form 5329. You file this form with your tax return for the year. The form is where you report the RMD shortfall, calculate any tax due, and request the waiver.
3. Request the waiver with an explanation. On the form, you explain that the failure was due to reasonable error and that reasonable steps are being taken to remedy the shortfall. Be honest and specific about what happened (for example, you did not know the inherited IRA had an RMD, or a custodian transfer arrived late).

There is no guarantee; the waiver is at the IRS's discretion. But a prompt correction with a clear explanation is exactly what the waiver provision is for. If the tax is waived, you still owe ordinary income tax on the distribution you took, since that distribution is taxable income for the year you received it.

The 2021 to 2024 inherited-IRA relief (historical, not current law)

You may have read that the IRS waived penalties for missed annual RMDs from certain inherited IRAs. That is real, but it was temporary relief for specific tax years, not a permanent change, so read this section as history.

The background: for years, it was uncertain whether beneficiaries subject to the 10-year rule also had to take annual RMDs in years 1 through 9 when the original owner had died on or after their required beginning date. The IRS issued a series of notices, 2022-53, 2023-54, and 2024-35, providing that the missed-RMD penalty would be waived for 2021, 2022, 2023, and 2024 for certain missed annual RMDs from these inherited IRAs. Final regulations later confirmed that annual RMDs do apply in that situation going forward.

What this means for you now:

• If your miss was an inherited-IRA annual RMD in 2021 through 2024, the penalty was likely waived by those notices. Confirm your exact facts against the notices (and consider a tax professional), but do not pay a penalty you may not owe.
• If your miss is for 2025 or later, the relief does not cover it. The current 25% / 10% framework applies.

What to do right now

If you just realized you missed an RMD, do these three things in order:

1. Take the missed distribution now. Contact your custodian and take the shortfall amount as soon as possible. This stops the clock: it puts you inside the correction window and shows the IRS you are remedying the error. Remember that the distribution is taxable income in the year you receive it.
2. Calculate the penalty and file correctly. Use the Report tab in the app to model the penalty at the post-2022 rates. Then report the shortfall on Form 5329 with your tax return, and if the miss was a reasonable error, use the form to request the waiver.
3. Prevent a repeat. Set a calendar reminder for early December to verify every RMD for the year, confirm the required-beginning-date rules for any new account, and double check any inherited IRA for a year-of-death RMD in the year of the original owner's death.

A worked example

This is an illustration, not your situation. The numbers are round and simple so the math is easy to check:

The point of the example: the penalty is on the shortfall only, prompt correction cuts it by more than half, and the waiver path can eliminate it. The most expensive thing you can do is wait.

Frequently asked questions

What is the penalty for missing an RMD?

Under current law, 25% of the RMD shortfall, reported as an excise tax on Form 5329. If you correct within the correction window, it drops to 10%. The IRS can also waive it for reasonable error.

How do I fix a missed RMD?

Take the missed distribution immediately, report the shortfall on Form 5329 with your tax return, and request a waiver if the miss was due to reasonable error. Do not wait for the IRS to contact you.

When does the correction window end?

Generally by the end of the second following tax year, but a deficiency notice or assessment can end it earlier. Fix it as soon as you discover the miss to stay safely inside the window.

Can the IRS waive the missed RMD penalty?

Yes, at its discretion, if the shortfall was due to reasonable error and reasonable steps are being taken to remedy it. You request the waiver on Form 5329 with an explanation of what happened.

Is the penalty on the whole account or just what I missed?

Only the shortfall. If your RMD was $20,000 and you took $5,000, the 25% or 10% rate applies to the $15,000 you missed.

Does the 25% rate apply to misses before 2023?

SECURE 2.0 changed the rate starting in 2023. Earlier misses were subject to the old 50% rate, though the same waiver principles could apply. If your miss predates 2023, verify the details with a tax professional.

Do I still owe income tax on the late distribution?

Yes. The distribution is taxable income in the year you receive it, whether or not the penalty is reduced or waived. The excise tax is a separate tax on top of the income tax.