Step 1: Take the Missed Distribution Immediately
The moment you realize you missed or under-took your RMD: contact your IRA custodian immediately and take the corrected distribution. The earlier you correct within the IRS two-year correction window the lower the penalty (25% drops to 10%). Do not wait — every day without correction extends the penalty exposure.
Missed RMD recovery cost comparison
| Missed RMD Amount | 25% Penalty If Not Corrected | 10% Penalty If Corrected Timely | Tax on the RMD Itself (22%) | Best Action |
|---|---|---|---|---|
| $10,000 | $2,500 | $1,000 | $2,200 | Take RMD immediately + file 5329 |
| $25,000 | $6,250 | $2,500 | $5,500 | Take RMD immediately + file 5329 |
| $50,000 | $12,500 | $5,000 | $11,000 | Take RMD + consult CPA + file 5329 |
Step 2: File Form 5329
File IRS Form 5329 with your tax return for the year of the missed distribution. Part VIII of Form 5329 is specifically for RMD shortfalls. Calculate the 25% excise tax on Line 52 or the reduced 10% if you qualify for the correction window. Include a statement with the form explaining the reasonable cause for requesting penalty abatement if applicable.
Under SECURE 2.0 if you correct a missed RMD within the correction window (typically 2 years) the 25% penalty is reduced to 10%. File Form 5329 showing the corrected distribution and request the 10% corrected rate rather than the full 25%.
Missed RMD recovery action plan
| Recovery Step | Action | Form/Document | Timing |
|---|---|---|---|
| 1. Take missed distribution | Contact custodian and withdraw shortfall | None (just the distribution) | Immediately |
| 2. File Form 5329 | Report missed RMD and calculate penalty | IRS Form 5329 | With tax return |
| 3. Request abatement if eligible | Attach statement of reasonable cause | Statement + Form 5329 | With Form 5329 |
| 4. Set future reminders | December 1 annual calendar reminder | Calendar system | Immediately |
Penalty Abatement: When the IRS May Waive the Penalty
The IRS may waive the 25%/10% excise tax for reasonable cause. Qualifying reasons include: first-time mistake, reliance on incorrect advice from a financial professional, serious illness, or administrative error. Attach a written statement to Form 5329 explaining the circumstances and requesting waiver. The IRS has historically been lenient on first-time RMD mistakes with prompt correction.
- Take the missed distribution from your IRA custodian immediately
- File Form 5329 with your tax return reporting the excise tax
- Request penalty reduction to 10% by noting the SECURE 2.0 correction window
- Consider requesting full penalty abatement if you have reasonable cause
- Set a December 1 annual calendar reminder to prevent future missed RMDs
Calculate Your Missed RMD Penalty Cost
Enter your missed RMD amount to see the 25% vs. 10% corrected penalty and your total recovery cost.