Missed RMD: The Four Steps to Fix It This Month
Fixing a missed RMD takes four steps, and the first is the one that matters most: get the money out now. The sooner you correct it, the stronger your case for a waiver and the lower the worst-case rate. (IRS: RMD FAQs)
- Withdraw the shortfall — the missed amount, from the account it should have come from.
- File Form 5329 for the year of the miss, even if you otherwise wouldn't file it.
- Request the waiver — write "RC" and the amount on the form and attach a short letter.
- Don't pay the excise tax up front. Let the IRS decide on the waiver first.
Do this, and most honest mistakes cost 10% at worst and nothing at best.
Missed RMD Penalty: Form 5329 and the Waiver Letter
The penalty is figured in Part IX of Form 5329: the required amount, the amount distributed, and the shortfall. To ask for a waiver, enter "RC" and the shortfall in parentheses next to the shortfall line, and explain in your letter. (IRS: About Form 5329)
A good letter is short and specific:
- What happened (an illness, a custodian error, a misunderstanding of the new age)
- When you discovered it and when you withdrew the shortfall
- What you've done so it won't happen again
When does the correction window close?
The 10% rate applies if you take the missed amount before the IRS mails a deficiency notice or assesses the tax, and no later than the last day of the second tax year after the miss. After that, it's 25% (26 U.S.C. §4974).
Our take: always ask for the waiver
Paying the excise tax without asking is the most expensive mistake here. The IRS commonly waives it for reasonable errors that are promptly corrected. Then set up the next one properly: get the amount from the RMD calculator, double-check your start year on the RMD age calculator, and keep the RMD table handy. Avoid a repeat: RMD deadline — December 31, and the April 1 exception.