Penalty for Missing an RMD and How to Correct It

Missing a required minimum distribution triggers an excise tax on the shortfall, though recent federal rules have lowered the penalty and made correction simpler. The penalty is applied to the amount not withdrawn, and the IRS allows a self-correction window under certain conditions.

The excise tax on missed RMD withdrawals

The IRS assesses an excise tax on any required minimum distribution that fails to be withdrawn in full by the deadline. Historically, this penalty was 25% of the shortfall—a harsh consequence that made RMD planning critical for older account owners. Starting in 2023, under the SECURE 2.0 Act, the penalty dropped to 10% for failures not corrected within the grace period, though 25% still applies if the error persists after correction.

The shortfall is straightforward: if your RMD was $50,000 and you withdrew only $30,000, the shortfall is $20,000. A 10% penalty equals $2,000. That amount is due as an excise tax on IRS Form 6069 or (more commonly now) Form 3115 if correcting through an amended return.

The penalty applies regardless of intent. Whether you forgot, didn’t realize you inherited an account, or faced a clerical error, the tax is owed unless you correct the miss within the allowable window.

SECURE 2.0’s reduced penalty and correction window

Congress recognized that many RMD failures were unintentional slips rather than deliberate tax avoidance. SECURE 2.0 (passed in December 2022, effective for years beginning in 2023) reduced the base excise tax from 25% to 10%—a major relief for account owners who catch and fix the miss promptly.

More importantly, the law introduced a clear grace period: you have until the due date of your tax return for that year (typically April 15 of the following year, or October 15 with extension) to correct the shortfall without triggering the 25% penalty. If you correct within this window, the 10% penalty applies only to any portion of the shortfall that remains at the deadline.

The mechanics of self-correction

The IRS allows self-correction if:

• You file an original or amended tax return showing the missed distribution as income for the year it should have been withdrawn.
• You withdraw the shortfall amount.
• You file the return by the due date or within the grace period.

For example, you miss your 2024 RMD and realize it in January 2025. You withdraw the full missed amount in January, then file an amended 2024 return by April 15, 2025 (or October 15 if extended). The 10% penalty applies, but not the steeper 25% rate.

If the IRS notifies you of the miss before you file a return claiming the correction, the rules are more complex—the penalty structure still applies, but you lose some ability to avoid the 25% rate. Early correction is therefore essential.

When the penalty applies and which accounts are affected

The RMD penalty applies to all qualified retirement accounts once the account owner reaches age 72 (increased from 70½ by SECURE 2.0). The accounts include:

• Traditional IRAs and SEP IRAs
• 401(k) plans and similar employer plans (403(b), 457 plans)
• SIMPLE IRAs

The Roth IRA is exempt during the original account holder’s lifetime; RMDs do not apply until after the owner’s death, when beneficiaries must take distributions.

The penalty applies to each account separately. If you have multiple IRAs, the IRS treats them as a single account for RMD purposes (you can aggregate the RMDs), but if you miss across multiple plans, each shortfall is subject to the penalty. The same aggregation rule does not apply to 401(k)s and other employer plans—each plan’s RMD must be satisfied independently.

Reporting the penalty on your tax return

The excise tax is reported on Form 6069 (Return of Excise Taxes Related to Employee Benefit Plans) if you file it directly with the IRS, but most taxpayers claim the correction on an amended Form 1040 or through the IRS correction process.

When you file the amended return:

1. Report the missed distribution as ordinary income for the year it should have been withdrawn.
2. Include the 10% excise tax as an additional tax liability.
3. Attach a statement explaining the correction and the reason for the miss.

The IRS has become more lenient about accepting these corrections if they are submitted promptly. The 10% penalty is then withheld from your refund or collected with your tax bill.

What happens if you ignore the penalty

Ignoring a missed RMD and the excise tax does not make it disappear. The IRS tracks RMD compliance through statements filed by custodians (Form 5498 reports the balance; Form 1099-R reports distributions). If you fail to correct the miss:

• The 25% penalty rate may eventually apply if the IRS pursues enforcement.
• Interest and penalties may be added if you under-reported income.
• The account may become subject to an audit.
• Correcting years later becomes more difficult without the grace period.

The takeaway: if you realize an RMD was missed, act within the grace period and correct it before April 15 (or your extension due date). The cost of prompt correction is far less than allowing penalties to compound.

See also