Form 5329 — Missed Your RMD? Cut the Penalty to 10% or Zero

Discovering that you forgot a required minimum distribution is one of those quiet financial gut-punches that tends to arrive months after the fact, usually while you are reconciling a year-end statement or filling out next spring’s tax return. For decades, the cost of that oversight was famously brutal: the Internal Revenue Service charged a 50% excise tax on whatever you failed to withdraw, a penalty severe enough that retirees often described it as confiscatory. The good news, if you are reading this with a sinking feeling, is that the rules changed in your favor, and the form you need to fix the problem is more forgiving than its reputation suggests.

The short answer: if you miss a required minimum distribution (RMD), you report the shortfall and calculate the excise tax on Form 5329, but the SECURE 2.0 Act dropped that tax from 50% to 25%, and down to just 10% if you correct the mistake quickly. Better still, the penalty can be waived entirely when the shortfall stemmed from a reasonable error and you are taking reasonable steps to fix it. The path to relief runs through one form, one short statement, and a corrective withdrawal you make as soon as you notice.

What the penalty is, and how SECURE 2.0 softened it

A required minimum distribution is the amount the IRS forces you to withdraw each year from most tax-deferred retirement accounts once you reach the mandatory age. If you fail to take that distribution by the deadline, the government levies an excise tax on the shortfall, which is simply the dollar amount you should have withdrawn but did not. For years this was a flat 50%, meaning a $10,000 RMD you overlooked could trigger a $5,000 penalty on top of the income tax you would eventually owe on the money itself.

The SECURE 2.0 Act, enacted in December 2022, rewrote that math. The headline excise tax fell from 50% to 25% of the shortfall. And if you correct the shortfall within a defined “correction window,” the rate drops further to 10%. In practical terms, the law transformed a punitive penalty into something closer to a manageable fee, provided you act with reasonable speed once you realize what happened. The reduction does not happen automatically in the sense of erasing your paperwork obligation; you still have to report the missed RMD and claim the lower rate yourself.

The correction window: how long you really have

The correction window is the heart of the reduced-penalty rules, and it is worth understanding precisely because the deadline is not a simple anniversary. The window runs from the date the tax is imposed until the earliest of three events: the date the IRS mails you a notice of deficiency, the date the IRS assesses the tax, or the last day of the second taxable year after the year the RMD was due.

For most people who catch their own mistake before the IRS does, the third milestone is the one that matters. Suppose you missed a required minimum distribution that was due for 2025. You generally have until the end of 2027, the last day of the second taxable year after 2025, to take the makeup distribution and qualify for the reduced 10% rate. That is a meaningful runway, but it is not open-ended, and it can be cut short if the IRS reaches out first with a deficiency notice or an assessment. The lesson is to move promptly rather than assume you have the full window, because two of the three triggers are outside your control.

Where this lands on Form 5329

You report the missed RMD and figure the excise tax on Form 5329, specifically Part IX, which carries the slightly intimidating title “Additional Tax on Excess Accumulations in Qualified Retirement Plans.” Despite the name, this is the section built for exactly your situation: an account from which too little was withdrawn. Part IX is where you enter the amount that should have been distributed, the amount actually distributed, and the shortfall on which the excise tax is calculated.

Form 5329 is also the workhorse for several other retirement-account corrections, which is why it shows up in adjacent situations. The same form, for instance, surfaces in how to fix an excess Roth contribution, where a different part of the form handles a different kind of overage. If you have wrestled with that process before, the mechanics here will feel familiar, even though the part number and the underlying problem differ.

How to request the waiver, step by step

The penalty can be waived entirely if the shortfall was due to reasonable error and you are taking reasonable steps to remedy it. The IRS does not publish a rigid checklist of what counts as reasonable error, but the procedure for asking is well defined. Follow it in order.

1. Take the missed distribution first. Before you touch the form, withdraw the amount you should have taken. This makeup distribution is the single most important piece of evidence that you are remedying the error, and the waiver request rests on it.
2. Complete Part IX of Form 5329. Work through the section that calculates the excise tax on your shortfall.
3. Write “RC” and the amount on the additional-tax line. “RC” stands for reasonable cause. On the line for the additional tax, you write “RC” followed by the amount of the excise tax you want waived, placed in parentheses. In practice, many filers report the additional tax as the amount they are asking the IRS to waive and let the IRS decide whether to grant the relief.
4. Attach a signed statement. Explain the error in plain language: what went wrong, the relevant dates, the amount you missed, and the corrective distribution you have now taken. Attach supporting documents that back up your account, such as a letter from your custodian or, if illness was the cause, medical records.

A clean order of operations

The simplest way to keep the process from spiraling is to follow a fixed sequence the moment you discover the problem. Take the missed RMD as soon as you spot the error, without waiting for tax season. Then file Form 5329, either attached to your return or, when necessary, on its own for the year the RMD was due. Filing for the correct year matters because the excise tax is tied to the year the distribution was owed, not the year you happened to notice.

It is also worth a quiet note for the future: certain strategies can satisfy a required minimum distribution and reduce the odds of a repeat. A qualified charitable distribution, in which money goes directly from your IRA to a charity, can count toward your RMD, which is one reason some retirees lean on it to keep the obligation from slipping through the cracks. That is a planning tool for next year rather than a fix for this one, but pairing prompt correction now with a more deliberate withdrawal plan going forward is how you avoid filling out this form twice.

The broader takeaway is reassuring. The missed-RMD penalty earned its fearsome reputation under the old 50% regime, and that reputation lingers. Under current law, a prompt makeup distribution, a correctly completed Part IX, and a candid reasonable-cause statement give most filers a realistic shot at paying 10%, or nothing at all.

What the 2026 draft instructions change

The IRS posted the draft 2026 Instructions for Form 5329 on September 8, 2026. The “What’s New” section adds one item, and it is not about required minimum distributions: “Beginning with distributions made after December 29, 2025, a distribution from your employer’s defined contribution plan for or with respect to certified long-term care insurance is not subject to the 10% additional tax on early distributions if certain requirements are met,” with a pointer to Publication 590-B. The list of accounts the form covers now ends with Trump accounts, the new account type created in 2025, alongside IRAs, HSAs, ABLE accounts and the rest. The missed-RMD excise tax, the 10 percent reduced rate and the waiver request described above are not among the changes the draft announces. The draft is not for filing; this section will be updated when the final instructions are released.

Sources

• IRS — Instructions for Form 5329: https://www.irs.gov/instructions/i5329
• IRS — About Form 5329: https://www.irs.gov/forms-pubs/about-form-5329
• IRS — Retirement plan and IRA required minimum distributions FAQs: https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs