What qualifies as reasonable cause for an RMD penalty waiver?

The IRS does not publish an exhaustive list, but generally accepted reasonable causes include: serious illness or incapacity, reliance on incorrect written advice from a qualified tax professional, administrative error by the plan custodian, reasonable misunderstanding of a complex rule (especially for first-time RMD participants), or natural disaster. The IRS grants waivers more readily for first-time errors than for repeat violations.

Can you get the full 25% penalty waived?

Yes. The IRS can fully waive the 25% penalty (or the 10% corrected penalty) if reasonable cause is established. The key requirements: (1) the shortfall was due to reasonable error, (2) you are taking steps to remedy the situation (i.e., you took or are taking the missed RMD), and (3) you file Form 5329 with a clear explanation. Many first-time errors result in full waivers.

What is the correction window for the 10% reduced penalty?

The correction window under SECURE 2.0 is defined as: (1) the date the IRS issues a notice of deficiency, (2) the date the IRS assesses the tax, or (3) the end of the second taxable year beginning after the year of the error — whichever comes first. Practically, this means taking the missed RMD within two calendar years of the year it was missed gives you the best chance of the 10% rate.

Scenario

RMD Penalty Waiver — How to Request Relief with Form 5329

How do you get the RMD penalty waived if you missed a distribution?

Missing a Required Minimum Distribution triggers a 25% excise tax on the amount not withdrawn. However, SECURE 2.0 (effective 2023) reduced this from 50% and introduced a "correction window": if you take the missed RMD within the correction window (generally by the end of the second tax year following the year the RMD was missed), the penalty is further reduced to 10%.

Beyond the correction window reduction, the IRS may fully waive the penalty if you can demonstrate "reasonable cause" — typically by showing the shortfall was due to an honest mistake, not willful neglect. Waivers are more commonly granted for first-time errors, reasonable reliance on incorrect advice, or administrative errors by the plan custodian.

The waiver is requested by filing Form 5329 (Additional Taxes on Qualified Plans) with your tax return, attaching an explanation letter.

Key RMD Rules

1Missed RMD penalty: 25% excise tax on the shortfall.
2Correction window: penalty reduced to 10% if the missed RMD is taken by the end of the second tax year following the missed year.
3Full waiver: possible if reasonable cause demonstrated on Form 5329 with an explanation letter.
4First step: always take the missed RMD as soon as possible, before filing the waiver request.
5Form 5329 is filed with the annual Form 1040 for the year the distribution should have been taken.

How to Request an RMD Penalty Waiver: Step by Step

1. Take the missed RMD as soon as you realize the error. 2. File Form 5329 with your tax return for the year the RMD was missed. 3. On Form 5329, complete Part IX (Additional Tax on Excess Accumulations in Qualified Retirement Plans). 4. Write "RC" (Reasonable Cause) and the waiver amount on the penalty line to indicate you are requesting a waiver. 5. Attach a written statement explaining the reason for the missed distribution (medical issue, reliance on incorrect advice, administrative error, etc.). 6. The IRS may follow up with questions or automatically grant the waiver.

Common RMD Mistakes to Avoid

⚠Not taking the missed RMD before requesting the waiver — the IRS generally expects you to correct the error first.
⚠Missing the Form 5329 filing — the penalty is calculated automatically if Form 5329 is not filed with the return.
⚠Not attaching an explanation letter — without a written reasonable cause statement, the IRS will not consider a waiver.

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Frequently Asked Questions

Disclaimer: This content is for informational purposes only and does not constitute tax or financial advice. RMD rules are based on IRS Publication 590-B and SECURE 2.0 Act provisions. Always consult a qualified tax professional or financial advisor for guidance specific to your situation. IRS rules may change; verify current requirements at irs.gov.

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