Contributed by: Henry, FreeTaxUSA Agent, Tax Pro
Did you miss an RMD? Maybe you overlooked the deadline, misunderstood the rules, or changed custodians. There are several common reasons why you might take too little or miss a required distribution altogether. If this applies to you, you’ll want to act quickly to correct the shortfall and avoid unnecessary penalties.
What is an RMD?
Many retirement accounts have an RMD, which is the minimum amount you must withdraw each year once you reach a certain age. RMDs usually apply to:
- Traditional IRAs
- SEP IRAs
- SIMPLE IRAs
- 401(k)s and other employer-sponsored retirement plans
- 403(b)s
- 457(b)s
- Profit sharing plans
- Other defined contribution plans
The IRS requires RMDs because contributions to these accounts were often tax-deferred. Eventually, the government requires those funds to be taxed.
You’ll generally need to take an RMD after you turn age 73. If you reach age 73 in 2023 or later, you must begin taking RMDs by April 1st of the year after you turn 73. After that, the deadline for taking RMDs every year is December 31st.
Example: Maren turned 73 in July 2026. She has until April 1, 2027, to take her 2026 RMD. After that, she must take her 2027 RMD by December 31, 2027, her 2028 RMD by December 31, 2028, and so on.
Retirement plan participants may postpone taking RMDs until the year they retire, unless they own 5% or more of the sponsoring business.
If you’re the original owner of the retirement account, your custodian will typically calculate the RMD amount each year. If the original owner died and you’re the beneficiary, you become responsible for taking the RMD. There are different rules for spouse and non-spouse beneficiaries, with the spouse receiving more flexible options. Instructions for calculating the RMD for either the owner or the beneficiary are included in IRS Publication 590-B. Although the formula is the same for both 401(k)s and IRAs, the rules for managing and taking those withdrawals differ.
What happens if you don’t take an RMD?
- If you miss an RMD or withdraw too little, you face a penalty tax of 25% on the amount not withdrawn.
- If you correct the mistake and withdraw the missed RMD within a two-year correction window, the penalty is reduced to 10%.
- You can request a penalty waiver from the IRS if the shortfall was due to reasonable cause and you’ve taken steps to fix it. The IRS doesn't specifically define what qualifies as reasonable error, but it generally refers to a good-faith mistake that was made despite exercising ordinary care, rather than intentional disregard. Examples could include illness or incapacity, a family emergency, or not being aware of the retirement account until it was past time to take the RMD. The IRS determines reasonable error on a case-by-case basis, so many other situations could qualify.
You must file Form 5329 with your tax return for the year you missed the RMD to report the tax. If you’re requesting the IRS waive the penalty, attach a letter of explanation when you file Form 5329. FreeTaxUSA provides the opportunity to include an explanation.
Example: Forrest is 75 and was required to take a 2026 RMD of $5,000 by December 31, 2026. In early 2026, he was diagnosed with cancer and moved to another state to be closer to family during treatment. Because he was in and out of the hospital throughout the year, he missed the deadline.
When Forrest prepares his 2026 tax return in February 2027, he realizes the mistake. He contacts his IRA custodian and requests a corrective distribution of $5,000. When he files Form 5329 with his 2026 tax return, he’ll include a statement requesting a waiver of the penalty tax.
Since the $5,000 distribution was made in 2027, it’ll be reported as income on his 2027 tax return, and he’ll receive Form 1099-R in early 2028. Forrest will also likely need to take his 2027 RMD by December 31, 2027, so his 2027 tax return may include both the corrective distribution for his missed 2026 RMD and his 2027 RMD.
How to report a missed RMD as the original account owner
FreeTaxUSA makes it easy to report a missed RMD. Here are the steps to follow if you’re the original owner of the retirement account:
- Follow the menu path: Income > Common Income > Retirement Income (1099-R).
- Enter any 1099-R forms you received.
- When you’re done, continue to the next screen.
- If you’re age 73 or older, the software will ask if you need to take an RMD. If you answer “Yes”, you’ll be asked if you took the full RMD. If you answer “No” to taking the full RMD, you’ll be prompted to enter your RMD (the amount you were supposed to receive) and the total RMD amount you actually received by the deadline.
- On the following screen, you’ll be asked how much of the missing RMD you withdrew during the correction window.
- If you select “None”, the 25% penalty tax will apply to the shortfall.
- If you select “Some of it”, the 25% penalty tax will apply to the portion not withdrawn, and the 10% penalty tax will apply to the portion withdrawn during the correction window.
- If you select “All of it”, the 10% penalty will apply to the full withdrawn amount.
- Next, you’ll be asked if you can claim a waiver to reduce or waive the RMD penalty.
- If you answer “No”, the software will generate Form 5329 with the applicable additional tax applied in Part IX. Here’s an example of a taxpayer who owes the 10% tax:
b. If you answer “Yes”, you’ll be asked to enter the RMD amount to be waived and explain why you qualify for the waiver. The software will generate Form 5329 showing zero additional tax owed in Part IX because of the waiver.
Rest assured that completing Form 5329 without the additional tax on line 54a or 54b is consistent with IRS guidelines. When the IRS processes your return, they’ll review the information you provide and decide whether to approve your waiver request. If the request is denied, the IRS will notify you of any additional tax owed. This generally comes in the form of a letter in the mail.
How to report a missed RMD as the beneficiary
The steps for reporting a missed RMD from an inherited retirement account may vary depending on the beneficiary’s age. For detailed instructions, please read our Community article on reporting a missed RMD as a beneficiary.
Conclusion
Missing an RMD is usually something you can fix. The most important steps are to withdraw the missed amount as soon as possible, report the shortfall on Form 5329, and request a waiver if the mistake was due to reasonable error. FreeTaxUSA can help you report the missed RMD and generate the required forms, but the IRS will make the final decision on whether any penalty can be reduced or waived. If you’re unsure how the RMD rules apply to your situation, consider contacting your retirement account custodian for guidance.