Lifestyle

Missing a Required IRA Withdrawal After 73 Triggers a Penalty, but It Can Often Be Reduced or Waived. How the Rule Works

By Curtis Jones · October 28, 2026

Money in a traditional IRA cannot stay there forever. Once you reach a certain age, the tax code requires you to start taking money out each year, and skipping or shorting one of those withdrawals carries a penalty. The IRS also has a process for asking that the penalty be reduced or forgiven.

The IRS says you generally must start taking withdrawals from your traditional IRA, SEP IRA, SIMPLE IRA and retirement plan accounts when you reach age 73. These yearly amounts are called required minimum distributions, or RMDs, and they count as taxable income except for any part already taxed.

Who has to take them. According to the IRS, the rules cover traditional, SEP and SIMPLE IRAs along with workplace plans such as 401(k), 403(b) and 457(b) plans. Roth IRAs are different. The agency says the RMD rules do not apply to Roth IRAs or designated Roth accounts while the owner is alive, though beneficiaries who inherit those accounts are subject to them.

The first-year timing. Your first RMD is for the year you reach 73, but the IRS lets you delay it until April 1 of the following year. After that, each year’s withdrawal is due by December 31. That means someone who waits until April 1 will generally have two required withdrawals in the same year. Taking the first one by December 31 of the year you turn 73 instead spreads the income over separate tax years, the IRS notes.

Working longer. For many workplace plans, the IRS says you may be able to delay RMDs until the year you retire, unless you own more than 5% of the business sponsoring the plan. That option does not apply to IRAs. FINRA notes there are exceptions.

Who figures the amount. An IRA custodian or plan administrator may calculate the RMD, but the IRS says the account owner is ultimately responsible for taking the correct amount. If you have several traditional IRAs, the RMD is figured separately for each one, but the total can generally be withdrawn from one or more of them. Distributions from 401(k) and 457(b) plans must be taken separately from each plan.

The penalty. If you do not withdraw the full amount by the deadline, the IRS says the amount not withdrawn may be subject to an excise tax of 25%. That drops to 10% if the missed amount is corrected within two years. The tax is reported on Form 5329, filed with your federal return for the year the withdrawal was required.

Under the Form 5329 instructions, getting the lower rate means taking out the missed amount from the same plan and filing a return that reports the tax during what the IRS calls the correction window. That window ends at the earliest of three points: when the IRS mails a deficiency notice, when the tax is assessed, or at the end of the second taxable year after the year the tax applies.

Asking for a waiver. The IRS can also waive part or all of the tax. According to the instructions, you must show the shortfall was due to reasonable error and that you are taking reasonable steps to fix it. To request relief, you file Form 5329, write “RC” and the amount you want waived next to the shortfall line, and attach a statement of explanation. The IRS reviews the request and notifies you if more tax is owed.

The first practical step after a missed withdrawal is to take it as soon as possible, then talk with a tax professional about filing.

This article is for general information and is not financial or legal advice. Tax rules can change and individual situations differ, so confirm the details with the IRS or a tax professional. This article was produced with the assistance of AI and fact-checked against the sources cited by LightWave Reports.