RMD Penalty
The IRS excise tax imposed when a taxpayer fails to take the required minimum distribution from a retirement account.
What is RMD Penalty?
The RMD penalty is a federal excise tax charged when an account holder fails to take the required minimum distribution (RMD) from a tax-deferred retirement account—such as a traditional IRA, 401(k), or 403(b)—by the applicable deadline. Under the SECURE 2.0 Act of 2022, the penalty was reduced from 50% to 25% of the shortfall amount, and further to 10% if corrected within a two-year correction window. The IRS may waive the penalty entirely for reasonable cause. Beginning in 2023, RMDs are generally required starting at age 73.
Example
A 75-year-old retiree has a traditional IRA with an RMD of $12,000 due by December 31, 2024, but takes only $2,000. The $10,000 shortfall triggers a 25% penalty: $2,500 in excise tax on the 2024 return. If they file Form 5329 and take the missed distribution promptly, they may qualify for the reduced 10% corrective penalty of $1,000.