Missed RMD penalty: what it costs and how to reduce it
Enter the RMD you had to take and what you actually took. The calculator shows the excise tax at the full rate, at the reduced rate once the shortfall is corrected, and the difference.
Excise tax on the shortfall
$1,200
10 % of $12,000, reported on Form 5329.
| Shortfall | $12,000 |
| At 25 % | $3,000 |
| At 10 % once corrected | $1,200 |
| Saved by correcting | $1,800 |
Worked out by Radif Partners · How we calculate · limits read on irs.gov · not personal financial advice
If you take less than your required minimum distribution for a year, the shortfall is subject to an excise tax of 25 %, reported on Form 5329. SECURE 2.0 cut the rate from 50 % for tax years beginning in 2023, and added a lower rate of 10 % when you take the missing amount and file a return reflecting the tax within the correction window, which runs at most to the end of the second year after the year of the shortfall. You can also ask the IRS to waive the tax entirely if the shortfall came from a reasonable error and you are fixing it, by attaching an explanation to Form 5329. Example: an RMD of $18,000 for 2025 of which only $6,000 was taken leaves $12,000 short. Left alone, the tax is $3,000; corrected in time it is $1,200, and with an accepted waiver it is zero.
The rates since 2023
| Situation | Excise tax on the shortfall | On a $12,000 shortfall |
|---|---|---|
| Shortfall not corrected | 25 % | $3,000 |
| Taken and reported within the correction window | 10 % | $1,200 |
| Waiver for reasonable error granted | 0 % | $0 |
| Rule before 2023, still printed on some pages | 50 % | $6,000 |
The tax applies to the amount not distributed, not to the whole RMD, and not to the account. Taking $6,000 of an $18,000 requirement leaves $12,000 subject to tax. The income tax on the distribution, once you take it, is a separate matter: it is due in the year the money comes out.
Your shortfall and the tax at each rate
Excise tax on the shortfall
$3,750
| Shortfall | $15,000 |
| At 25 % | $3,750 |
| At 10 % once corrected | $1,500 |
| Saved by correcting | $2,250 |
The correction window
Publication 590-B (read on irs.gov) defines the window as ending on the earliest of three dates: the mailing of a deficiency notice for this tax, the date the tax is assessed, and the last day of the second tax year that begins after the year in which the tax arose. For a shortfall in 2025, the outer limit is December 31, 2027. Two things must happen inside it to get the 10 % rate: the missing amount must be distributed, and a return reflecting the tax must be filed. In practice that means taking the distribution as soon as the error is found and filing Form 5329 with the tax at 10 %, either with the return for the year or on its own if the return was already filed.
Asking for a waiver
The full waiver remains available. If the shortfall was due to a reasonable error, such as a custodian's mistake, a serious illness, a move or a misunderstanding of a new rule, and you have taken or are taking steps to remedy it, you can request that the tax be waived. The method is set by the instructions to Form 5329: complete the form, write "RC" and the amount you want waived next to the excise tax line, and attach a short statement. Pay no tax on the amount you ask to waive. The IRS reviews the explanation and writes only if it refuses.
A practical order follows. First, take the missing amount. Second, file Form 5329 asking for the waiver. If the IRS refuses, the reduced rate remains possible as long as the correction window is still open, which is another reason to take the distribution quickly.
Common causes of a shortfall
- The first RMD forgotten after delaying it to April 1. Two distributions fall in the same year, and only one is taken (first RMD deadline).
- A 401(k) left at a former employer. Its RMD cannot be taken from an IRA, so an owner who took the whole amount from the IRA still has a shortfall in the plan (several accounts).
- An inherited IRA under the 10-year rule. Yearly minimums are enforced from 2025 when the owner had started RMDs; many heirs only knew the 10-year deadline (inherited accounts).
- A wrong balance. The RMD uses the December 31 value of the prior year; a rollover in transit at year end must be added to the receiving account.
Reading the two numbers in the calculator
The first line is the tax if nothing is done; the second, the tax once the shortfall is distributed and reported within the window; the last, what the correction saves. On $12,000 the saving is $1,800. The calculator does not decide whether a waiver would be granted: that depends on the facts you explain to the IRS.
Years before 2023
A shortfall for a tax year that began before 2023 falls under the old 50 % rate. The waiver for reasonable error was available then too, and remains the usual route for an old missed distribution. Missed yearly amounts under the 10-year rule for 2021 to 2024 are covered by IRS relief and owe no excise tax (Notice 2024-35).
Check this year’s RMD before December 31
Your 2026 required minimum distribution
$18,987
| Age reached in 2026 | 76 |
| Table and factor | Uniform Lifetime, 23.7 |
| RMD with the Uniform table | $18,987 |
| RMD with the table that applies | $18,987 |
Statute of limitations
SECURE 2.0 also set a clock for this tax. The period for the IRS to assess it starts when you file your income tax return for the year, even if Form 5329 is not attached, and runs three years. Before that change, an unfiled Form 5329 meant the period never started, and old shortfalls could be assessed many years later. Filing the income tax return now starts the clock, but an honest correction is still the safer route: it is one more reason to file Form 5329 as soon as a shortfall is known instead of waiting.