How Do I Get a Waiver of RMD Penalty?

Key Takeaways

• I just discovered I missed my required minimum distribution from last year, and the thought of a 25% penalty had me panicking. If you fail to withdraw the RMD by the applicable deadline, the IRS can charge you a penalty of 25% of the amount you should have withdrawn. But here’s what I learned: the IRS can waive the missed RMD excise tax entirely if you’ve already taken the missed distribution and can show the error was reasonable.

• The waiver request is made on IRS Form 5329 plus a brief explanation letter. When requesting a waiver, you typically don’t send a check for the penalty upfront—you enter “0” on the penalty line and write “RC” (reasonable cause) with the shortfall amount. Do not pay the excise tax penalty when you submit your waiver request; you will be notified if the IRS denies your request.

• This waiver process applies both to retirees taking RMDs from their own traditional IRAs and 401(k)s and to beneficiaries of inherited IRAs who may have missed distributions under the 10-year or life expectancy rules. The IRS mandates RMDs to ensure that individuals begin to withdraw and pay taxes on their retirement savings, which have typically been tax-deferred. This is a way for the IRS to collect taxes on income that has not yet been taxed.

• Under SECURE Act 2.0, the penalty dropped from 50% to 25%, and can be further reduced to 10% if you correct the error within two years. But with proper documentation, the IRS often waives the penalty completely.

• Revolutionary Wealth positions itself as the premier planning partner to reduce future RMDs, prevent future penalties, and guide clients step-by-step through waiver requests when mistakes happen.

Understanding RMDs, Excise Tax, and the Current Penalty Rules

When I first retired, the rules said I had to start taking money out of my IRA at age 70½. Then it changed to 72. Now I’m hearing it’s 73 or even 75 depending on when you were born. With all these changes happening while I was busyenjoying my grandkids and traveling, it’s no wonder I lost track and missed a distribution.

A required minimum distribution (RMD) is the mandatory yearly withdrawal the Internal Revenue Service requires the account holder or account owner to take from their tax-deferred retirement accounts once they reach a certain age. Account holders and account owners are responsible for managing, calculating, and withdrawing RMDs from their retirement accounts in compliance with IRS regulations. For those born between 1951 and 1959, the RMD age is typically 73 in 2024. If you were born in 1960 or later, you won’t need to begin taking RMDs until age 75 under SECURE 2.0. You can delay taking your first RMD until April 1 of the following year. For example, if you reach age 73 in 2024, you must take your first RMD by April 1, 2025, and your second RMD by December 31, 2025.

Here’s what counts as retirement accounts subject to RMD rules:

Note: For 403(b) plans, the term "contract owner" is used, and RMDs for contract owners are calculated similarly to other account holders, based on IRS rules.

Roth IRAs are a type of roth account that differs from traditional accounts because contributions are taxed upfront and no RMDs are required during the account holder's lifetime.

The penalty for missing an RMD is an excise tax on the amount you should have taken but didn’t. The IRS mandates RMDs to ensure that individuals begin to withdraw and pay taxes on their retirement savings, which have typically been tax-deferred. Currently, the IRS imposes a 25% penalty on the RMD shortfall. However, if you correct the error within two years and file correctly, this can be reduced to just 10%. RMDs are required so that retirees pay taxes on previously tax-deferred income.

The amount of your annual RMD is calculated by dividing the retirement account's prior year-end fair market value by a life expectancy factor published by the IRS.

Here’s the reassuring part: despite the scary percentages, the IRS has a long history of often waiving the penalty entirely when retirees fix the mistake promptly and document reasonable cause. Missing one RMD is a solvable problem, not a financial catastrophe. The key is knowing the steps and acting quickly.

Calculating the Amount of the RMD

Calculating your required minimum distribution (RMD) is one of the most important steps in managing your retirement accounts and staying on the right side of IRS regulations. The Internal Revenue Service sets out clear RMD rules to ensure that you begin withdrawing funds from your tax-deferred retirement plans—like traditional IRAs and 401(k)s—once you reach the required beginning date. Getting this calculation right helps you avoid the dreaded excise tax for a missed RMD and keeps your retirement savings strategy on track.

Here’s how to calculate your RMD amount:

1. Find Your December 31 Account Balance:Start with the balance of each retirement account as of December 31 of the previous year. This is the number you’ll use for your RMD calculation.

2. Determine Your Life Expectancy Factor:The IRS provides the Uniform Lifetime Table, which lists a life expectancy factor based on your age at year-end. Most IRA owners and retirement plan participants use this table, but inherited IRAs and certain beneficiaries may use a different table. Your life expectancy factor is crucial for figuring out the correct RMD amount.

3. Do the Math:Divide your December 31 account balance by your life expectancy factor. For example, if you’re 73 and your IRA balance was $100,000, and the IRS table gives you a factor of 26.5, your required minimum distribution calculated for the year would be $3,774.

First Steps If You Missed an RMD (For Retirees and Beneficiaries)

That sinking feeling hit me when I was preparing my federal tax return and noticed my 1099-R showed a much smaller distribution than what my IRA custodian had calculated as my annual RMD. I realized I never took the full amount of the RMD I owed.

If you find yourself in the same situation—whether you’re an IRA owner or a beneficiary who inherited retirement funds—here’s exactly what to do:

Step 1: Confirm the Shortfall

Before you can fix anything, you need to know exactly how much you missed:

• Pull up your December 31 balance from the prior year for each retirement account

• Find the RMD amount for that year (your custodian statement often shows this, or you can calculate it using IRS life expectancy factor tables)

• Compare the required withdrawal to your actual distributions

• The difference is your RMD shortfall

For example, if your IRA balance was $500,000 on December 31, 2023, and your life expectancy factor from the IRS Uniform Lifetime Table was 24.6, your required minimum distribution calculated would be approximately $20,325. If you only withdrew $10,000, your shortfall is $10,325.

Step 2: Take the Missed Distribution Immediately

Whether the mistake is from 2023, 2024, or an inherited IRA from years back, the first move is to withdraw the full missed RMD as soon as you notice. Contact your financial institution and request the distribution. Don’t wait until year-end or until you’ve figured out the waiver process—get the money out now.

Step 3: Keep Documentation

Gather and save everything:

• Account statements showing the December 31 balance

• Distribution confirmation letters from your custodian

• Any email correspondence about the corrective withdrawal

• Notes documenting when you discovered the error

• Records of the date and amount of your corrective distribution

Step 4: Note the Tax Impact

The corrective withdrawal is taxed as ordinary income in the tax year you take it, not retroactively. A missed 2023 RMD taken in 2025 is taxable income in 2025. This matters because:

• It could push you into a higher tax bracket

• It may affect Medicare IRMAA brackets (the surcharge on Medicare premiums for higher earners)

• It could increase how much of your Social Security benefits are subject to taxation

Revolutionary Wealth can help retirees and beneficiaries walk through these calculations and timing choices so you don’t accidentally make the tax hit worse while trying to fix the RMD mistake.

How to Request an IRS Waiver of the RMD Penalty

So how do I actually get a waiver of the RMD penalty? The answer centers on one document: IRS Form 5329, “Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts.”

Both retirees (account owners) and inheritors of IRAs and employer sponsored plans use this same form to report the missed RMD and request a waiver of the excise tax. Here’s how the process works:

Step-by-Step Form 5329 Process:

1. Get the correct year’s form– You need IRS Form 5329 for each tax year you missed an RMD. If you missed distributions in both 2023 and 2024, you’ll complete two separate forms. You can download Form 5329 and its instructions directly from the IRS website to ensure you have the most up-to-date version.

2. Complete IRS Form 5329– Fill out the required information to request a waiver of the penalty.

3. Complete the RMD section– Identify the account type, the amount you should have taken, and the amount you actually took. The difference is your shortfall.

4. Enter “0” for the penalty when requesting a waiver– On the line where you would calculate the excise tax owed, enter “0” rather than calculating 25% of your shortfall.

5. Write “RC” and the shortfall amount– Following current IRS instructions, write “RC” (reasonable cause) in the margin along with the dollar amount of the shortfall. This signals you’re requesting a penalty waiver.

6. Attach your explanation letter– This is where you make your case for why the IRS should waive the penalty. More on this in the next section.

Commonly accepted reasons for a waiver request include serious illness, incorrect advice from a tax advisor, and administrative errors by afinancial institution.

Filing Options:

The good news: you generally don’t need to amend your old tax return solely to address a missed RMD penalty. The form and explanation letter handle the penalty waiver request.

Revolutionary Wealth’s role is helping clients avoid technical mistakes on Form 5329 that could delay or jeopardize the waiver, especially when there are multiple retirement accounts or multiple missed years to untangle.

What to Say in Your RMD Penalty Waiver Letter

The IRS expects a short, factual, and respectful letter that explains three things: what went wrong, why it was a reasonable error, and how you’ve fixed it.

Common Reasonable Error Examples for Retirees:

• Confusion over the new RMD age under SECURE 2.0 (turning 73 after years of hearing 70½ and 72)

• Health issues, cognitive decline, hospitalizations, or major caregiving responsibilities

• Miscommunication with a custodian or tax advisor (assuming automatic withdrawals were set up when they weren’t)

• Complexity from multiple accounts or late-year rollovers between institutions

• Death or serious illness of a spouse that disrupted financial management

Reasonable Error Examples for Inherited Accounts:

• Unclear or changing rules after the Secure Act (confusion about whether the 10-year rule requires annual distributions)

• Delays in settling the estate and retitling accounts in inherited IRA format

• Beneficiaries who didn’t receive timely RMD information from the custodian

• Confusion about the sole beneficiary rules versus multiple beneficiary situations

Basic Structure of Your Penalty Waiver Letter:

Your letter should be approximately one page and include:

1. Opening– State the tax year(s) and account type(s) affected (e.g., “traditional IRA ending in 1234” or “inherited IRA from my late spouse, Jane Doe, who died in 2022”)

2. What happened– Briefly describe how the error occurred

3. Why it was reasonable– Explain the circumstances that led to the mistake

4. What you’ve done to fix it– Confirm the full missed RMD was withdrawn on a specific date

5. Prevention measures– Describe safeguards now in place (automatic distributions, calendar reminders, working with a financial advisor)

Sample Language You Can Adapt:

“I am writing to request a waiver of the excise tax on my missed 2023 required minimum distribution from my traditional IRA (Account #XXXX-1234). Due to my hospitalization in October 2023 and subsequent recovery period, I was unable to manage my financial affairs and inadvertently failed to take my annual RMD of $18,500 before December 31. Upon discovering this error while preparing my 2023 tax return, I immediately withdrew the full missed amount on March 15, 2024. I have now enrolled in automatic withdrawals to ensure all future RMDs are taken on schedule.”

Revolutionary Wealth can draft or review a customized waiver letter for clients, increasing the likelihood that the IRS sees the situation as reasonable and fully corrected.

Special Considerations for Inherited IRAs and Missed Beneficiary RMDs

Many readers aren’t just retirees managing their own accounts—they’re adult children or surviving spouses who have inherited IRAs and are overwhelmed by conflicting rules that seem to change every year. After the owner's death, different RMD rules apply to beneficiaries, and the timing and calculation of required distributions are directly impacted by the owner's death.

Understanding the Post-SECURE Act Frameworks:

After the owner’s death, different rules apply based on your relationship to the deceased:

The 10-year rule for most non-spouse beneficiaries has created massive confusion. The IRS has gone back and forth on whether annual RMDs are required in addition to emptying the account by year 10, leaving many beneficiaries uncertain about their obligations.

How Missed Inherited IRA RMDs Are Handled:

The same penalty framework applies: a 25% excise tax (potentially reduced to 10%) on the missed portion. Beneficiaries also request waivers using Form 5329 and an explanation letter, just like original owners.

Concrete Example:

Sarah inherited her father’s traditional IRA in 2021. Her custodian told her she had 10 years to empty the account, so she planned to wait until year 8 or 9 to start taking distributions. In 2025, she learns the IRS regulations may have required annual RMDs for 2023 and 2024.

Here’s Sarah’s path forward:

1. Calculate the required annual withdrawals for 2023 and 2024 using the Single Life Expectancy Table (Survivor Table II)

2. Take corrective distributions for both years immediately

3. File Form 5329 for tax year 2023 with a waiver request

4. File Form 5329 for tax year 2024 with a waiver request

5. Attach explanation letters citing the conflicting IRS guidance and custodian advice as reasonable cause

Inherited IRAs are an area where professional help is especially valuable. Revolutionary Wealth builds multi-year withdrawal plans tailored to the 10-year window to both minimize taxes and avoid future penalties.

How Revolutionary Wealth Helps You Prevent Future RMD Problems

Once I’d solved my missed RMD, my bigger question was: how do I make sure this never happens again? The stress of that penalty waiver process was enough—I didn’t want a repeat performance.

Proactive Strategies Revolutionary Wealth Uses:

• Automatic RMD withdrawals– Setting up automatic distributions across all traditional IRAs, SEP IRAs, and where possible, 403(b)s and 401(k) plans, with distributions scheduled well before each December 31 applicable deadline

• Coordinating across multiple custodians– If you have multiple retirement accounts at different institutions, calculating each RMD separately and ensuring nothing falls through the cracks

• Account consolidation– Where appropriate, rolling pre tax retirement accounts into fewer IRAs to simplify administration and reduce the chance of overlooking an account

• Multi-year Roth conversion planning– Strategic conversions in your late 60s and early 70s (before you begin taking RMDs) can reduce future traditional IRA balances, lowering future RMDs and lifetime taxes

• Qualified Charitable Distribution (QCD) strategies– For those who are charitably inclined, QCDs from IRAs can satisfy your annual RMD while keeping the distribution out of taxable income

Tools and Processes:

Revolutionary Wealth isn’t just solving a one-time mistake—we position ourselves as an ongoing partner in what we call Revolutionary RMD planning: making your required withdrawals predictable, tax-efficient, and stress-free throughout retirement and across generations.

Your Next Step:

Gather your year-end account statements for all retirement plans and contact Revolutionary Wealth. We’ll review whether any RMDs were missed, guide you through the waiver process if needed, and design a forward-looking strategy to reduce your future RMDs and keep you in full compliance with IRS rules.

Frequently Asked Questions About RMD Penalty Waivers

Q1: Can I still request a waiver if I missed RMDs several years in a row?

Yes, you generally can file a Form 5329 for each affected year, even if the normal statute of limitations for amending tax returns has passed. However, the IRS will expect all missed RMDs to be taken now, and you’ll need a detailed explanation of why the errors persisted over multiple years and what has changed to prevent future failures. Multi-year misses are more complex and benefit from professional guidance.

Q2: Do I need to amend my old tax return (Form 1040) to fix a missed RMD?

In most cases, no. You can file Form 5329 as a standalone document for prior years. The missed distribution is taxed in the year you actually take it, not retroactively. So if you take a corrective distribution in 2025 for a missed 2023 RMD, you report that income on your 2025 tax return. You don’t need to amend your 2023 Form 1040 solely for the RMD penalty issue.

Q3: What if the IRS denies my waiver request?

If the IRS denies your waiver, you may owe taxes in the form of the 25% (or reduced 10%) excise tax plus interest from the original RMD deadline. You’ll receive a notice from the IRS. At that point, a tax professional can help you understand the response, determine whether to pay or contest the decision, and adjust your future RMD planning to avoid repeat issues.

Q4: Does taking more than my RMD this year make up for a missed RMD last year?

No. Excess distributions in one year cannot be applied to satisfy prior or future year RMDs. Each year’s RMD requirement stands completely on its own. This is a common misconception. Even if you took $50,000 this year when your RMD was only $20,000, you still owe a Form 5329 and waiver request for last year’s missed $15,000 distribution.

Q5: Can Qualified Charitable Distributions (QCDs) help with missed RMDs?

QCDs are powerful tools for current-year RMD planning—they can satisfy your RMD while keeping the distribution out of adjusted gross income. However, you generally cannot use a QCD retroactively to cover a prior year’s missed RMD. That said, QCDs are a cornerstone of Revolutionary Wealth’s broader strategy to reduce future RMDs and minimize lifetime taxes for charitably inclined clients. If you’re 70½ or older, ask about incorporating QCDs into your annual withdrawal plan.

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