Missed Your Required Minimum Distribution (RMD)? How to Correct It and Possibly Avoid the Penalty.
Life is filled with milestones we eagerly anticipate, whether it’s earning your driver’s license at 16, celebrating your 21st birthday with a toast, or reaching the age to qualify for Social Security.
Yet one milestone that often catches people off guard is reaching the age when Required Minimum Distributions (RMDs) must begin from retirement accounts. With RMD rules constantly evolving, missed RMDs are becoming increasingly common. Whether due to a simple oversight or confusion about inheritance regulations, overlooking an RMD happens more often than you might think, especially when life is already full of other responsibilities and transitions.
If this happened to you, take a deep breath. The good news is that there’s a straightforward way to fix it, and often you can avoid the penalty altogether.
What Happens If You Miss an RMD?
The IRS can charge a penalty for missing the required withdrawal:
Standard penalty: 25% of the amount you should have withdrawn.
Reduced penalty: 10% if you correct the mistake promptly (usually within two years).
(Before 2023, this penalty was 50%, but it was lowered under the SECURE Act 2.0.)
Acting quickly and taking timely steps can greatly improve your chances of having the penalty waived.
How to Correct a Missed RMD
Step 1: Take the Missed Distribution Right Away
As soon as you discover a missed RMD, withdraw the full required amount from your account immediately. That’s your first step in showing the IRS that you’re taking prompt corrective action.
Step 2: File Form 5329
Next, complete Form 5329 (2024) — Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts.
This form tells the IRS what happened and lets you request a waiver of the penalty.
If you’ve missed RMDs for more than one year, you’ll need to file a separate Form 5329 for each year.
Step 3: Request a Penalty Waiver
The IRS is often understanding when a missed RMD happens due to a reasonable error and when you’ve taken steps to fix it.
You can request a waiver by attaching a short explanation letter to your Form 5329. In your letter:
Explain why you missed the RMD (e.g., confusion about rules, lack of notification, or personal circumstance).
Include proof that the missed RMD was withdrawn, such as a check copy or the account statement for that month.
Explain the steps you’re taking to prevent missing future distributions, such as setting up automatic annual withdrawals.
Wait to pay the penalty until the IRS makes a decision, they will let you know if payment is required.
Letter For Waiver Example:
Subject: Request for Waiver of Excise Tax — Missed RMD for Tax Year 2025
I’m writing to request a waiver of the excise tax for a missed Required Minimum Distribution (RMD) from my Inherited IRA for 2025. My account custodian did not notify me that an annual RMD was required under the 10-Year Rule, and as a result, no distribution was taken for the year. As a result, I am requesting relief under IRC 4974(d).
When I noticed the error on 12/17/2025, I immediately placed trades and withdrew the full $27,000, which was sent to me after the funds settled on 12/19/2025. I’ve now set up automatic annual withdrawals to prevent this from happening again.
Thank you for your consideration of this request.
Sincerely,
[Your Name]
To recap, the letter should clearly explain what occurred and why it was a reasonable error, provide evidence that the missed RMD has been corrected, and outline the measures you’re taking to prevent it from happening again.
How Long Does It Take?
IRS response times can vary, some cases are resolved within a month, while others may take up to a year.
The most important thing is to file your paperwork and take your missed distribution as soon as possible.
Closing Thoughts
It’s normal to feel stressed if you miss an RMD, but the good news is it can be corrected. Many taxpayers have avoided penalties by taking the distribution, filing Form 5329, and sending a short waiver request letter. If you need help with any part of the process, I encourage you to reach out to a financial professional or accountant who can guide you through it.
Disclosure:
The information provided in this article is for educational and informational purposes only and should not be construed as specific tax, legal, or accounting advice. Stonehearth Capital Management is a registered investment adviser, but we are not accountants, enrolled agents, or tax attorneys. Rules surrounding Required Minimum Distributions (RMDs), missed distributions, and IRS Form 5329 penalty waiver requests are complex and may apply differently based on your individual circumstances. You should consult with a qualified tax professional, CPA, or attorney before taking any action related to RMD corrections or penalty-waiver filings. While we strive to provide accurate and current information, tax laws and IRS procedures are subject to change, and we make no warranty regarding completeness or accuracy.
