Missed an RMD? The Penalty Is 25% — or 10% If You Fix It in Time

Required minimum distributions come with a deadline and a meter. Before the SECURE 2.0 Act, the meter read 50 percent — one of the harshest penalties anywhere in the tax code. The current structure is more forgiving, and it is built explicitly to reward fixing the problem quickly. Here is how the penalty is computed, what the correction window does, and the sequence that applies once a miss is discovered.

The Penalty Is Charged on the Shortfall, Not the Account

The excise tax applies to the shortfall: the amount that was required to come out minus the amount that actually did. Two examples make the base clear: (IRS Publication 590-B)

• Full miss. Required RMD $20,000, distributed $0. Shortfall = $20,000. Penalty at 25%: $20,000 × 25% = $5,000.
• Partial miss. Required RMD $20,325 (a $500,000 balance at age 75, using the Uniform Lifetime Table factor of 24.6), distributed $12,325. Shortfall = $8,000. Penalty at 25%: $8,000 × 25% = $2,000.

The penalty sits on top of, not instead of, the ordinary income tax that is still due when the missed amount finally comes out.

The Correction Window: 25% Becomes 10%

SECURE 2.0 built a second rate into the statute. If the shortfall is corrected — the missed amount actually withdrawn — by the end of the second tax year after the year of the miss, and a corrected Form 5329 is filed, the excise tax drops from 25 percent to 10 percent. IRS Publication 590-B calls this the correction window.

Rerunning the two examples at the reduced rate:

Shortfall	Penalty at 25% (uncorrected)	Penalty at 10% (corrected in window)	Difference
$20,000	$5,000	$2,000	$3,000
$8,000	$2,000	$800	$1,200

The structure of the rule is the message: the tax code prices delay. The same miss costs two and a half times more if it sits unaddressed past the window.

The Waiver: Zero Is Also Possible

Beyond the reduced rate, the IRS retains discretion to waive the excise tax entirely for reasonable error. The mechanics run through the same form:

1. Take the missed distribution as soon as the error is discovered — the waiver process presumes the shortfall has been corrected.
2. File Form 5329 for the year of the miss.
3. Attach a written explanation describing the error — a custodian mix-up, a serious illness, a first-year misunderstanding — and the steps taken to fix it.

A waiver is discretionary, not automatic. The reduced 10 percent rate is the statutory floor a filer controls; the waiver is a request.

The Deadlines That Cause Misses in the First Place

Most missed RMDs trace to one of three mechanical details:

• December 31, every year. Each year's RMD is due by year-end. Distributions are counted when taken, and a December request that settles in January belongs to the wrong year.
• The first-year April 1 exception. The very first RMD may be delayed until April 1 of the year after reaching the starting age (73 for those born 1951–1959; 75 for those born 1960 or later). Using the delay stacks two taxable distributions — the delayed first and the on-time second — into one tax year.
• Aggregation has a boundary. IRA RMDs are calculated per account but can be satisfied from any combination of IRAs. Workplace plans do not participate: a 401(k) RMD must come from that plan, and an IRA withdrawal — however large — leaves the 401(k) requirement unmet. A household drawing generously from an IRA can still have a shortfall sitting in an old employer plan.

What This Does Not Mean

The softer penalty structure does not make a missed RMD a small event. The missed amount is still fully taxable when it comes out, and a catch-up distribution lands on top of the current year's regular RMD — two years of ordinary income compressed into one, which can push a household into a higher bracket, increase the taxable share of Social Security benefits, and cross a Medicare IRMAA threshold two years later. The 10 percent rate is a floor for a corrected miss, not a cost-free outcome, and the full waiver is granted case by case, not claimed. The cheapest version of this penalty remains the one that never accrues.

Go Deeper

• Roth & RMDs topic hub — distribution rules, conversions, and account mechanics in one place.
• Required Minimum Distributions: A Plain-English Guide for 2026 — the full long-form guide, including the calculation tables and QCDs.
• Retirement Projection tool — how required distributions fit a full income picture over time.

Frequently Asked Questions

Q: How large is the penalty for missing an RMD?

25 percent of the shortfall — the amount required but not distributed. On a $20,000 miss, that is $5,000. Corrected within the window with a corrected Form 5329, the rate drops to 10 percent — $2,000 on the same miss.

Q: How long is the correction window?

Through the end of the second tax year after the year the RMD was missed. The missed amount must actually be withdrawn and Form 5329 corrected within that period for the 10 percent rate to apply.

Q: Can the penalty be waived entirely?

The IRS has discretion to waive it for reasonable error. The sequence: take the missed distribution promptly, file Form 5329, and attach a written explanation of the error and the correction. The waiver is a request, not an entitlement.

Q: What deadlines lead to missed RMDs?

December 31 for every regular year; April 1 of the following year for the first RMD only (a delay that stacks two taxable distributions into one year); and the aggregation boundary — a 401(k) RMD cannot be satisfied from an IRA, so workplace-plan requirements have to be tracked separately.

The views and opinions expressed here are those of The Financial Sciences Company as of the publish date and are provided for informational and educational purposes only. They are not personalized investment, tax, or legal advice. The Financial Sciences Company, LLC is an investment adviser registered with the State of Texas. Registration does not imply a certain level of skill or training. Additional information is available in our Form ADV at adviserinfo.sec.gov.

General educational information, current as of 2026. Not personalized investment, tax, or legal advice — figures and rules change. For guidance specific to your situation, talk to a qualified professional.