The Missed RMD: Easy to Overlook, Expensive to Ignore
A missed required minimum distribution carries a 25 percent excise tax, reduced to 10 percent if corrected in time and sometimes waived for reasonable error. The fix is coordination before year end, not a scramble at filing season.
Required minimum distributions look simple until something goes wrong. The account owner misses a deadline. The wrong amount comes out. Several IRAs and retirement plans are not coordinated. A beneficiary misunderstands the rules for an inherited account. Then a routine retirement income item becomes a tax penalty item. I was quoted on this in Parade and MSN in May 2026, and the questions those reporters asked are the ones families should be asking before year end.
The rules in brief
An owner must begin distributions by April 1 of the year after reaching age 73, and by December 31 of every year after that. The starting age rises to 75 for those who reach 74 after 2032.1 Each year's amount is the prior December 31 balance divided by the life expectancy factor in the Service's tables. An owner with several IRAs may compute the amount for each and take the total from any one of them, but a 401(k) or other employer plan has to satisfy its own requirement separately, and an inherited account is never aggregated with the owner's own accounts.2
The penalty
A missed or insufficient distribution triggers an excise tax of 25 percent of the shortfall. If the shortfall is corrected within the correction window, generally by the end of the second year after the year of the miss, the rate drops to 10 percent.3 A retiree who was required to withdraw $40,000 and took $25,000 has a $15,000 shortfall, a $3,750 excise tax, or $1,500 if corrected in time.
The Service may also waive the tax entirely if the shortfall was due to reasonable error and reasonable steps are being taken to fix it. The request is made on Form 5329 with a statement of what happened and what was done about it, and the missed amount should be withdrawn before the form is filed.4
Qualified charitable distributions
An IRA owner who is at least 70 and a half can direct up to $111,000 in 2026 from the IRA to charity. The distribution is excluded from income, counts toward the year's required minimum distribution and avoids the percentage of income limits on the charitable deduction, which makes it the most efficient way for a charitably inclined retiree to satisfy an RMD.5
The checklist
- Which accounts are subject to a required distribution this year, including inherited accounts.
- The correct amount for each, using the right table and the right December 31 balance.
- Whether any inherited account rules apply, including the annual distributions now required during the ten year period for many beneficiaries.
- Whether a Form 5329 is needed for a prior year miss, and whether a waiver request is warranted.
- Whether a qualified charitable distribution fits the plan.
- Whether the custodian, the tax preparer, the financial advisor and any trustee are working from the same facts.
RMD planning is coordination. The deadline is December 31, the penalty is real, and the fix is a conversation among the advisors in the fall rather than a discovery in April.
Notes
- I.R.C. section 401(a)(9)(C), as amended by the SECURE 2.0 Act, Pub. L. 117-328, Div. T, section 107 (Dec. 29, 2022). ↩
- Treas. Reg. sections 1.408-8 (aggregation of IRAs) and 1.401(a)(9)-8 (separate plans). ↩
- I.R.C. section 4974(a) and (e), as amended by the SECURE 2.0 Act, section 302. Before 2023 the rate was 50 percent. ↩
- I.R.C. section 4974(d). ↩
- I.R.C. section 408(d)(8); IRS Notice 2025-67 (2026 limit of $111,000). A one time election permits up to $55,000 in 2026 to fund a charitable remainder trust or charitable gift annuity. ↩
Terry L. (T. L.) Turnipseed, J.D., LL.M., CTFA, is a tax, trust and estate attorney in Fort Lauderdale, Florida, and Head of Estate and Tax Planning at Alta Trust Company. He is a former tenured professor of law at Syracuse University. Reach him at tl@turnipseed.law or on LinkedIn. This article is general information, not legal advice.