Did You Miss the Required Minimum Distribution Deadline?

So, what is a “required minimum distribution” (RMD)? Basically, the IRS requires that owners of tax deferred retirement accounts begin withdrawing (and paying taxes on) minimum amounts each year upon attaining the age of 70½.  Beneficiaries of Inherited IRAs must usually begin taking RMDs in the year following the year of the accountholder’s death.  There is an exception for the original accountholder of a ROTH IRA; no RMDs need to be taken from a ROTH IRA during the original accountholder’s lifetime.

Severe Consequences May Apply for Missing an RMD

Whether the IRA is your own or an Inherited IRA, failure to withdraw a RMD by the deadline results in one of the highest penalties in the tax code:  50%!  The IRS does have flexibility to waive the penalty on a missed or late RMD. You have a much better chance of escaping the 50% penalty if you contact the IRS before they contact you.

If you missed the RMD deadline, the first thing you need to do is withdraw the required amount as quickly as possible.  The minimum you have to take out of the IRA depends on several factors including whether it’s your account or an inherited account.  In most cases, the custodian of the IRA will help you calculate the amount.

Once you know what you should have withdrawn, notify the IRS by filling out Form 5329.  Note that when submitting Form 5329, you also need to attach a brief explanation as to why you failed to take the necessary withdrawal.  Let the IRS know you have already taken steps to correct the error by requesting the RMD from the custodian of the IRA.

Need help Determining Your RMD?

Give our RMD Calculators a try.

RMD Calculator for Account Owners

RMD Calculator for Beneficiaries