The RMD penalty is a 25% excise tax on the amount of a required minimum distribution you were supposed to take but did not, and it can drop to 10% if you correct the shortfall within a defined window (Source: 26 U.S.C. 4974; IRS Publication 590-B, 2025). This guide explains the exact percentage, the correction-window mechanics, how to request a waiver on Form 5329, and the current age-73 start rule.
Missing a required minimum distribution triggers a 25% excise tax on the amount you failed to withdraw (Source: 26 U.S.C. 4974(a); IRS Pub. 590-B, 2025). The rate falls to 10% if you take the missed amount and file a return reflecting the tax during the correction window. The IRS may waive the tax entirely for reasonable cause if you file Form 5329.
What is the RMD penalty in 2026?
The RMD penalty is a 25% excise tax imposed on the difference between the required minimum distribution you should have taken and the amount you actually withdrew during the taxable year (Source: 26 U.S.C. 4974(a); IRS Pub. 590-B, 2025). The statute calls this the tax on “excess accumulations,” and the tax is paid by the account owner, not the plan.
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The tax applies to the shortfall, not the whole account. If your RMD for the year was $10,000 and you withdrew nothing, the 25% tax applies to the $10,000 you missed. If you withdrew $6,000, the tax applies only to the remaining $4,000 shortfall (Source: 26 U.S.C. 4974(a)).
This excise tax is separate from ordinary income tax. The distribution itself is generally taxable as income in the year it is finally taken, so a missed RMD can produce both the excise tax and the regular income tax on the same dollars (Source: IRS Pub. 590-B, 2025). Q3 Advisors publishes related retirement-tax explainers, including required minimum distributions for 2026.
Worked examples of the 25% RMD penalty
At a 25% rate, the RMD penalty equals one dollar of tax for every four dollars of missed distribution. The table below shows the base 25% excise tax and the reduced 10% figure that can apply when the shortfall is corrected within the correction window (Source: 26 U.S.C. 4974(a), (e)).
| Missed RMD amount | Penalty at 25% | Penalty at 10% (timely corrected) |
|---|---|---|
| $4,000 | $1,000 | $400 |
| $10,000 | $2,500 | $1,000 |
| $20,000 | $5,000 | $2,000 |
These figures show the excise tax only. Ordinary income tax on the distribution is still owed on top of the excise tax when the money is withdrawn (Source: IRS Pub. 590-B, 2025). The dollar impact depends on your marginal bracket and other income for the year.
How the penalty dropped from 50% to 25%
Before 2023, the excise tax on a missed RMD was 50% of the shortfall. The SECURE 2.0 Act reduced it to 25% and added a new 10% tier for timely corrections (Source: SECURE 2.0 Act, Section 302, Pub. L. 117-328). Section 302 struck “50 percent” from the statute and inserted “25 percent.”
The change applies to taxable years beginning after the enactment date of December 29, 2022, which means the 25% and 10% rates apply from the 2023 tax year onward (Source: SECURE 2.0 Act, Section 302(c), Pub. L. 117-328). For 2026 returns, the current rates apply; the old 50% figure appears only in older articles and pre-2023 tax years.
The 10% reduced rate and the correction window
The RMD penalty drops from 25% to 10% if, during the correction window, you take a distribution of the missed amount from the same plan and file a tax return reflecting the excise tax (Source: 26 U.S.C. 4974(e)(1); IRS Pub. 590-B, 2025). Both steps must happen inside the window for the reduced rate to apply.
The correction window is often summarized as “two years,” but the statute defines it more precisely. It begins on the date the tax is imposed and ends on the earliest of three events (Source: 26 U.S.C. 4974(e)(2)):
- The date the IRS mails a notice of deficiency under Section 6212;
- The date the tax is assessed by the IRS; or
- The last day of the second taxable year that begins after the end of the taxable year in which the tax was imposed.
The practical takeaway is that the window can close earlier than two years if the IRS issues a deficiency notice or assesses the tax first (Source: 26 U.S.C. 4974(e)(2); IRS Form 5329 Instructions, 2025). Because the window can end before a full two-year clock runs, the timing of the corrective distribution and the return is one factor that determines whether the 10% rate remains available.
How to fix a missed RMD: step by step
Correcting a missed RMD generally follows a defined sequence: take the money, report the shortfall on Form 5329, and, where applicable, request the reduced rate or a full waiver (Source: IRS Form 5329 Instructions, 2025). The steps below reflect the reporting procedure in the current instructions.
- Withdraw the missed distribution from the affected account as soon as the shortfall is discovered (Source: IRS Pub. 590-B, 2025).
- Complete Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, reporting the excess accumulation in the RMD section, Part IX on the 2024 form (Source: IRS Form 5329 Instructions, 2025).
- Determine whether the 10% reduced rate applies, which requires taking the missed amount and filing a return reflecting the tax within the correction window (Source: 26 U.S.C. 4974(e)(1)).
- If you are requesting a waiver for reasonable cause, figure the tax as if the full amount were due, subtract the amount you are asking the IRS to waive, and attach a statement explaining the shortfall and the steps you took to fix it (Source: IRS Form 5329 Instructions, 2025).
The instructions direct filers to enter the letters “RC” (reasonable cause) and the amount of the waiver being requested next to the relevant line, so the calculated additional tax can reflect the reduction you are seeking (Source: IRS Form 5329 Instructions, 2025). The IRS reviews the explanation and decides whether to grant the request.
Requesting a waiver for reasonable cause
The IRS may waive part or all of the RMD penalty if you can show the shortfall was due to reasonable error and that you are taking reasonable steps to remedy it (Source: 26 U.S.C. 4974(d); IRS Form 5329 Instructions, 2025). The waiver is not automatic; the statute gives the Secretary discretion, and the IRS reviews the facts you present.
To request it, file Form 5329, calculate the tax, subtract the waiver amount, and attach a letter of explanation describing the reasonable error and the corrective distribution you took (Source: IRS Form 5329 Instructions, 2025). The statute gives the Secretary discretion to waive the tax; it does not guarantee approval.
Because the waiver decision depends on documentation and facts, keeping records of when the shortfall was found and when the corrective withdrawal was made can support the request. Some retirees consider how a corrective distribution fits a broader tax plan, and a Roth conversion is one factor to weigh with a qualified professional, since amounts moved to a Roth are not subject to lifetime RMDs.
When RMDs start and which accounts are covered
Required minimum distributions currently begin at age 73. Your required beginning date is April 1 of the year following the calendar year you reach age 73, and for each year after that required beginning date you must withdraw the RMD by December 31 (Source: IRS Pub. 590-B, 2025; IRS Retirement Topics, Required Minimum Distributions). Waiting until April 1 for a first RMD means two distributions land in one year.
RMDs apply to traditional IRAs, SEP and SIMPLE IRAs, and workplace plans such as 401(k)s and other qualified plans (Source: IRS Retirement Topics, Required Minimum Distributions; IRS RMD Comparison Chart, IRAs vs. Defined Contribution Plans). Roth IRAs are not subject to RMDs during the owner’s lifetime, though beneficiaries of Roth accounts are subject to the distribution rules (Source: IRS Retirement Topics, Required Minimum Distributions).
Under SECURE 2.0, the RMD applicable age rises to 75 for individuals born in 1960 or later, taking effect beginning in 2033 (Source: SECURE 2.0 Act, Section 107, Pub. L. 117-328; IRS Notice 2023-23). For 2026 planning, age 73 remains the operative starting age. Related timing rules interact with items such as Medicare IRMAA brackets and the Social Security tax torpedo.
Inherited IRAs and missed beneficiary RMDs
Inherited IRAs carry their own RMD rules, and missed distributions on them can also trigger the excise tax. For owners who died after December 31, 2019, many non-spouse beneficiaries who are not eligible designated beneficiaries are subject to a 10-year rule requiring the account to be emptied by the end of the tenth year after the year of death (Source: SECURE Act of 2019, Pub. L. 116-94; IRS Pub. 590-B, 2025).
The IRS provided relief from the excise tax for certain missed beneficiary RMDs for 2021 and 2022, and extended that relief for 2023 and 2024 while the distribution regulations were being finalized (Source: IRS Notice 2022-53; IRS Notice 2024-35). The final regulations apply for calendar years beginning on or after January 1, 2025, so those annual distribution requirements are treated as taking effect for 2025 (Source: IRS Notice 2024-35). Because inherited-account rules turn on beneficiary type and date of death, this is an area where confirming the specific facts matters. Q3 Advisors covers connected topics such as the net investment income tax for 2026.
How the RMD penalty is calculated: quick reference
| Item | Rule (2026) | Source |
|---|---|---|
| Base penalty | 25% of the shortfall | 26 U.S.C. 4974(a) |
| Reduced penalty | 10% if corrected in the correction window | 26 U.S.C. 4974(e) |
| Prior penalty (before 2023) | 50% of the shortfall | SECURE 2.0 Act, Sec. 302 |
| Reporting form | Form 5329, Part IX (2024 form) | IRS Form 5329 Instructions, 2025 |
| Waiver basis | Reasonable error plus reasonable steps to remedy | 26 U.S.C. 4974(d) |
| RMD start age | 73 for those born 1951-1959; applicable age 75 for those born 1960 or later, beginning in 2033 | IRS Pub. 590-B, 2025; SECURE 2.0 Act, Sec. 107 |
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Q3 Advisors is a registered investment adviser focused on retirement tax planning. This article is educational and is not advice; for guidance on your own circumstances, consult a qualified tax or financial professional.
Frequently asked questions
What is the penalty for not taking Required Minimum Distributions (RMDs)?
The penalty is a 25% excise tax on the amount you were required to distribute but did not (Source: 26 U.S.C. 4974(a); IRS Pub. 590-B, 2025). The rate falls to 10% if you take the missed amount and file a return reflecting the tax within the correction window. Ordinary income tax on the distribution is also owed when the money is withdrawn.
When do I have to start taking RMDs from my tax-deferred retirement accounts?
RMDs generally begin at age 73. The first is due by April 1 of the year after you reach 73, and each later year the RMD is due by December 31 (Source: IRS Pub. 590-B, 2025; IRS Retirement Topics, Required Minimum Distributions). Under SECURE 2.0, the applicable age is 75 for individuals born in 1960 or later, taking effect beginning in 2033 (Source: SECURE 2.0 Act, Section 107, Pub. L. 117-328).
How is the amount of my annual RMD calculated?
An RMD is generally calculated by dividing the prior December 31 account balance by a life expectancy factor from the IRS distribution tables in Publication 590-B (Source: IRS Pub. 590-B, 2025; IRS Retirement Topics, Required Minimum Distributions). Most owners use the Uniform Lifetime Table. Q3 Advisors’ RMD guide for 2026 covers the tables and timing in more detail.
Can I avoid an RMD penalty if I missed my first RMD?
One approach the rules allow is to take the missed distribution promptly, report it on Form 5329, and either qualify for the 10% reduced rate by correcting within the correction window or request a full waiver for reasonable cause (Source: 26 U.S.C. 4974(d), (e); IRS Form 5329 Instructions, 2025). The IRS reviews the explanation and decides whether to grant relief.
Can the penalty for not taking the full RMD be waived?
Yes, the IRS may waive part or all of the tax if you show the shortfall was due to reasonable error and you are taking reasonable steps to remedy it (Source: 26 U.S.C. 4974(d)). You file Form 5329, subtract the waiver amount, and attach a statement of explanation. Waivers are not automatic; the statute gives the Secretary discretion, and the IRS reviews the facts before deciding.
Can I donate all or part of my RMD to charity without facing any penalties?
The rules permit a qualified charitable distribution from an IRA, available to owners at least 70 and one-half years old, and a QCD can count toward your RMD up to an annual exclusion limit the IRS indexes each year, $111,000 for 2026 (Source: IRS Notice 2025-67; IRS Pub. 590-B, 2025). A distribution satisfying the RMD, whether taken personally or sent to charity under those rules, avoids the missed-RMD excise tax.
What happens to my traditional IRA balance after my death?
After the owner’s death, the traditional IRA generally passes to beneficiaries, who are subject to inherited-account distribution rules (Source: IRS Pub. 590-B, 2025; IRS Retirement Topics, Beneficiary). For owners who died after 2019, many non-spouse beneficiaries who are not eligible designated beneficiaries face a 10-year rule to empty the account, and missed beneficiary distributions can also trigger the excise tax. The applicable rule depends on beneficiary type and date of death.
What if I miss my RMD deadline?
If you miss the deadline, one path the rules allow is to withdraw the missed amount immediately, file Form 5329 to report the shortfall, and either correct within the window for the 10% rate or request a reasonable-cause waiver (Source: 26 U.S.C. 4974; IRS Form 5329 Instructions, 2025). Acting quickly can help preserve the reduced rate.
Sources
26 U.S.C. 4974 (statute): https://www.law.cornell.edu/uscode/text/26/4974
IRS Publication 590-B (2025): https://www.irs.gov/pub/irs-pdf/p590b.pdf
IRS Form 5329 Instructions (2025): https://www.irs.gov/pub/irs-pdf/i5329.pdf
IRS Retirement Topics, Required Minimum Distributions: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
IRS Retirement Topics, Beneficiary: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary
IRS RMD Comparison Chart (IRAs vs. Defined Contribution Plans): https://www.irs.gov/retirement-plans/rmd-comparison-chart-iras-vs-defined-contribution-plans
IRS Notice 2025-67 (2026 inflation-adjusted retirement figures): https://www.irs.gov/pub/irs-drop/n-25-67.pdf
IRS Notice 2022-53: https://www.irs.gov/pub/irs-drop/n-22-53.pdf
IRS Notice 2023-23: https://www.irs.gov/pub/irs-drop/n-23-23.pdf
IRS Notice 2024-35: https://www.irs.gov/pub/irs-drop/n-24-35.pdf
SECURE Act of 2019, Pub. L. 116-94: https://www.congress.gov/116/plaws/publ94/PLAW-116publ94.htm
SECURE 2.0 Act, Pub. L. 117-328: https://www.congress.gov/117/plaws/publ328/PLAW-117publ328.htm
