What Happens If You Don't Take RMDs From Retirement Accounts?

Understanding Excise Taxes for Not Taking Required Distributions

You must take a certain amount out of your retirement account every year, starting the calendar year after you turn 73. The IRS calls these withdrawals Required Minimum Distributions (RMDs), and the agency assesses an excise tax (often referred to as RMD penalties) against people who don't withdraw the required amount. 

As of 2025, the penalty (aka excise tax) is 25% of the amount you didn't withdraw, but if you correct the issue by taking additional withdrawals during the correction window, the penalty drops to 10%.

Key takeaways

• The IRS requires taxpayers over age 73 to take required minimum distributions (RMDs) from 401(k)'s, IRAs, and other non-Roth retirement accounts. 
• If you don't take the RMD, the IRS will assess an excise tax.
• The excise tax (penalty) is 25% of the RMD not taken.
• The penalty drops to 10% if you correct the problem in the correction window (typically 2 years).
• If you forgot to take an RMD, you can apply for a waiver of this excise tax.
• TaxCure can help you find a tax professional to solve your tax problems.

To avoid excessive penalties, you need to understand which retirement accounts are subject to these rules, how to calculate your RMDs, and the deadlines for taking withdrawals. To help you out, here's an overview as well as links to additional resources about how to request abatement from RMD penalties. To get help now, use TaxCure to find an experienced tax pro today. 

Table of Contents

• What is an RMD?
  • Accounts subject to RMD rules
  • When to start taking RMDs
  • RMD rules on inherited IRAs
  • RMD rules for multiple retirement accounts
• Why do taxpayers incur penalties for not taking RMDs?
• RMD penalties - how to calculate and examples
  • excise taxes for not taking RMDs
  • How to calculate and pay RMDs
• Requesting abatement of the RMD excise tax
• How to find help using TaxCure
• Frequently asked questions

What are RMDs?

Required Minimum Distributions, commonly known as RMDs, are the distributions you must take out of your retirement account starting the year after you turn 73 (or the year after you retire if later, in some cases). The IRS requires you to take minimum distributions from IRAs, SEP IRAs, SIMPLE IRAs, and employer-sponsored retirement accounts like 401(k)'s. 

The purpose of RMDs is to prevent indefinite tax deferral - that's why this rule doesn't apply to non-tax advantaged retirement accounts like Roth IRAs. 

Which retirement accounts are subject to RMDs?

You must take RMDs from most tax-advantaged retirement accounts, including the following:

• Profit-sharing plans
• 401(k) plans
• 403(b) plans
• 457(b) plans. 
• Traditional IRAs
• SEPs
• SARSEPs
• SIMPLE IRAs.

When you contribute to these funds, the money you put in is not subject to income tax. Instead, you pay income tax when you take a withdrawal from the account. By requiring accountholders to take out a certain amount every year, the IRS ensures that this money is not held indefinitely and by extension, that it eventually gets taxed. 

You do not have to take RMDs from Roth IRAs or other designated Roth accounts — such as Roth-designated 401(k)'s. That's because the contributions to these accounts were made with after-tax income. However, if the original account holder dies, the beneficiaries are subject to RMD rules on Roth accounts as well as all of the retirement accounts listed above. 

RMDs also apply to defined benefit plans, but taxpayers generally don't have to worry about calculating their annual required distribution or facing penalties. With these accounts, the monthly payment is already based on the RMD. 

When do you need to start taking RMDs?

As of 2023, you must start taking RMDs in the calendar year after you turn 73 years old. However, there is one major exception to the age rule - if you are still working, you are not required to take RMDs from your employee-sponsored retirement account, unless you own 5% or more of the business that sponsors the plan.

For example, if you turn 73 in 2025, you must take your first RMD by April 1, 2026, and it should be based on the balance in your account(s) on the last day of 2024. Then, you must take a second RMD by December 31, 2026 - based on the balance in your account on the last day of 2025. All future RMDs must be taken by December 31st based on the account balance the previous year on December 31st.

In contrast, imagine that you're still working when you turn 73. The following year, you must start taking RMDs from your IRAs or any other relevant retirement accounts as outlined above. However, if your employer sponsors a plan, you do not have to take withdrawals from that plan until you retire. 

Once you retire, the timeline is similar to above. Say you retire in June of 2025. You must take the first RMD from that employee-sponsored plan by April 1, 2026, based on the account balance on the last day of 2024. Then, you must take another RMD by December 31, 2026, based on the account balance on the last day of 2025. 

In 2033, the age for RMDs rises to 75. The timing for the first and second RMDs is the same as outlined above. 

RMD rules for inherited IRAs

The rules for inherited IRAs can be very complicated. They also vary depending on the beneficiary's relationship with the original account holder - in general, spouses get more options than non-spouse beneficiaries, and eligible beneficiaries (which include permanently disabled people, minor children of the accountholder, and certain qualifying trusts) get longer to withdraw the funds from the account. 

If an account holder dies before taking their RMDs for the year, the beneficiary must withdraw the RMD for the year of death. There is a grace period if you miss the deadline. If the account holder was not subject to RMDs, then the beneficiary doesn't need to take RMDs. After that, there are additional rules that govern how quickly the funds need to be taken out of the account - in most cases, non-spouse beneficiaries must take out all the funds within 10 years. 

RMDs on multiple retirement accounts

If you have multiple IRAs and/or 403(b) accounts, you should calculate the RMD on each account separately. But then, you can take the RMD from whichever account you like. 

For example, say you have three IRAs. The RMD for account A is $15,000, the RMD for account B is $5,000, and the RMD for account C is $7,000. That means you must take out a distribution of at least $27,000. You can take a portion of the distribution out of each account, or you can take the full amount from one account.

However, if you have a 401(k) or 457(b) plan, you must calculate the RMD for each account and then withdraw the minimum amount from each account. Say, for example, that you have two 401(k)'s. Account A requires an RMD of $5,000, and Account B has an RMD of $12,000. In this case, you cannot just take $17,000 out of either account. Instead, you must withdraw at least $5,000 from account A and $12,000 from account B. 

Adjust these rules accordingly if you have a mixture of accounts. For instance, say you have a 401(k) with a $6,000 RMD, an IRA with a $10,000 RMD, and a SIMPLE IRA with a $8,000 RMD. You must take at least $6,000 from that 401(k), but then, you can decide how you'd like to take the $18,000 from your IRAs. You can take the full amount from either your traditional or SIMPLE IRA, or you can divide the required $18,000 distribution between these accounts in the manner that you decide.

The IRS will also assess the penalty (excise tax) if you didn't take the correct RMD from each account that you own. For example, say that you have a 401(k) with an RMD of $10,000 and an IRA with an RMD of $10,000. You get confused about the rules for multiple accounts, and you take the full $20,000 out of your IRA. 

Even though you took the correct total amount, you failed to take the RMD on the 401(k). By extension, you will now incur a penalty of $2,500 (that's $10,000 x 25%). Again, however, if you rectify the situation by taking the correct withdrawal within two years, the penalty drops to 10%, which is $1,000 in this scenario.

Why do taxpayers incur RMD taxes (penalties)?

If you don't take out the RMD, the IRS will assess a penalty (technically an excise tax) based on the amount that you were supposed to withdraw and didn't. Common reasons for missing RMDs include: 

• Not understanding when they need to start making required withdrawals
• Getting confused about the rules for people who are still working
• Not calculating the required distribution correctly
• Confusion about how to deal with multiple retirement accounts.
• Miscalculations or oversights after the death of an account holder.
• Forgetting or miscalculating due dates
• Not tracking due dates correctly

If you understand the IRS's rules about required minimum distributions, you can avoid these common errors. 

RMD penalties - calculations and examples

RMD penalties (technically excise taxes) are 25% of the required distribution that was not withdrawn. For example, if you were supposed to withdraw $20,000 and you don't take out anything, the penalty is $5000. In contrast, if your RMD was $20,000 and you withdrew $15,000, the penalty would be based on the $5,000 you didn't withdraw - making it $1250.

If you correct the issue by taking an additional distribution during the correction period, the penalty drops to 10%. The correction period ends the earliest of the following:

• The date of mailing the deficiency notice related to the RMD excise tax (penalty);
• The date the tax is assessed; or
• The last day of the second taxable year that begins after the end of the taxable year in which the additional tax is imposed.

For example, say that you were supposed to take a $30,000 RMD in tax year 2024, but you didn't withdraw anything. In this case, the correction period ends on the last day of 2026. 

However, the correction period may end sooner if the IRS notices the error and sends you a deficiency notice or assesses the excise tax (RMD penalty) against you.

Prior to the SECURE 2.0 Act, the excise tax for failing to take an RMD was 50% of the undistributed funds.

Excise taxes for not making required minimum withdrawals

Although you may hear RMD excise taxes referred to as penalties, they are actually taxes. That's an important distinction because it means that the IRS can assess penalties on top of the tax. In contrast, the IRS doesn't assess penalties on top of penalties. Then, interest accrues on both the excise tax and the penalties.

For example, let's say you were supposed to take an RMD for $40,000. You didn't take it, so the IRS calculates an excise tax of 25% of the RMD or $10,000. If you didn't file a return for that year, this tax may be exposed to the failure-to-file penalty, which is 5% of the underreported tax per month until you file, up to 25%. If you filed but didn't pay the tax, the failure-to-pay penalty will apply - that's between .5 to 1% of the unpaid tax, assessed monthly, up to a maximum of 25%. 

Missing an RMD can get extremely expensive once you consider both the excise tax and the penalties. However, correcting the issue by taking out additional distributions during the correction period can save you a lot of money. 

To illustrate, this chart shows taxes and penalties for missing an RMD based on whether you filed on time or late. It also shows you how correcting the issue by taking additional distributions during the correction period can minimize the penalties. 

 

As you can see, making up the distributions during the correction period can save you a lot of money. You will save even more money if you request an abatement of the excise tax and the associated penalties. 

Calculating and paying RMD penalties

If you don't take an RMD, you should attach Form 5329 (Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts) to your tax return. This form helps you calculate the excise tax (penalty) you owe for not taking the distribution. 

If you don't file this form and the IRS realizes that you have not taken an RMD, they will calculate the penalty and send you a notice. 

How to get RMD penalties waived

You can actually use the same form to calculate RMD penalties and ask for a penalty waiver. To request penalty relief, fill out Form 5329, but don't calculate the RMDs as instructed on the form. Instead, write "RC" and the amount of the penalty that you want waived in parentheses next to the penalty lines. Then, pay the tax as if the penalty waiver were already accepted. You should also attach a letter explaining the situation -- check out our RMD penalty relief sample letter.

Requesting penalty relief on an RMD

Requesting tax waivers when you fail to take an RMD

If you missed an RMD that you have not corrected yet, write the amount you were supposed to withdraw on line 52b and the amount you withdrew on 53b. Then, on 54b, note the difference between these two amounts times .25. But if you want to apply for a waiver, write "RC" along with the amount you want waived in parentheses next to line 54b. 

To illustrate, say that your RMD was $30,000 and you took out $20,000. The penalty amount on line 54b should normally be $2500, but if you write (RC - $10,000) to the side of line 54b, and then you note $0 on that line. 

If you only had reasonable cause for half of the missing withdrawal, you would note (RC - $5000) next to line 54b) and then, you'd calculate the penalty as $1250.

Requesting penalty waivers based on corrected RMDs

Repeat the same process to request relief on lines 52a, 53a, and 54a — the only difference is that these lines are used to calculate penalties based on making up RMDs during the correction window. 

On line 52a, you note the RMD that you failed to take but corrected during the correction window. Then, on line 53a, you note the amount that you withdrew before the RMD deadline (don't include the withdrawals that you took during the correction window). Finally, on line 54a, you note the difference times .10. Again, to request abatement, note "RC" and the amount you want abated in parentheses next to this line.

RMD penalties are excessively high. Basically, the IRS is saying, if you don't take money out of your retirement account, we get to take out a quarter of what you didn't withdraw. Because these penalties are so stiff, a tax professional can be a lifesaver. 

How a tax professional can help if you don't take an RMD

A tax professional can help you:

• Determine how much you need to withdraw after missing an RMD.
• Identify the correction window so that you can minimize penalties. 
• Fill out Form 5329 accurately. 
• Apply for a reasonable cause penalty waiver using Form 5329 and writing a letter to the IRS. 
• Negotiate with the IRS about penalty relief. 
• Set up payment plans if you incur a tax liability that you can't afford to pay in full. 
• Ensure your rights are protected. 
• Guide you toward the best solution for your unique tax problem.
• Explain the RMD rules to ensure you don't face penalties in the future. 
• Help with estate planning so that your beneficiaries can avoid penalties and minimize tax exposure.

How to appeal RMD excise taxes

If you receive a notice of deficiency, you have 90 days to appeal in Tax Court - 150 days if the notice was sent to you out of the country. Filing a petition in Tax Court lets you appeal the tax without paying. There may be additional appeal options outlined in the letter that require you to pay first and then request a refund. 

You generally cannot appeal RMDs through the Collection Appeals Program (CAP) or through a Collection Due Process (CDP) hearing. However, if the IRS assesses the tax against you and then starts collection actions (for example, wage garnishments or asset seizures), you can appeal those actions through CAP or a CDP hearing. 

Get help with RMD penalties today.

RMD penalties can be devastating, and if you don't pay them, additional penalties and interest will accrue on your account. If you don't pay, the IRS may come after the rest of your retirement accounts, your wages, real estate, and nearly any other assets that you own. To protect yourself, you need an experienced tax professional to represent you. 

Get help now - use TaxCure to find an experienced tax pro who can help you minimize these penalties and get back into good standing with the IRS. Learn more about why you should use TaxCure to find help.

FAQs about failing to take RMDs

What is the current RMD penalty rate?

As of 2025, the penalty for not taking an RMD is 25% of the amount that was not withdrawn. Prior to the SECURE Act of 2022, the penalty was 50%. The penalty drops to 10% if you withdraw the funds within the correction window. Note, this is actually an excise tax, not a penalty.

Can I get an RMD penalty waived?

You can apply for a waiver if you had reasonable cause for not taking the required withdrawal. Again, note that the RMD penalty is an excise tax - it's just commonly referred to as a penalty. This is one of the few taxes that the IRS will waive. 

What is Form 5329? How do I fill it out?

Form 5329 is the form you use to calculate the excise tax for not taking RMDs from your retirement accounts. You can also use this form to request relief from that tax. On the form, note "RC" for reasonable cause and the amount of the RMD that shouldn't be considered when calculating the tax. Then, attach a statement detailing the reasonable cause. 

What counts as a “reasonable cause” for missing an RMD?

Reasonable cause includes death, serious illnesses, loss of records, and other significant events that prevent you from taking out the RMD. The IRS does not have an exhaustive list of events that constitute reasonable cause — As long as you acted with reasonable consideration for the rules and had some extenuating circumstances, you can argue that you're entitled to tax relief due to reasonable cause.