What Happens If You Forget to Take Your Required Minimum Distribution?

If you have an IRA that you have to take Required Minimum Distributions (RMDs) from, you need to do this every year by the end of the year. 

So what if you forget one year?

The rule is that if you don’t take your RMD by the end of the year, you could be subject to a penalty of 50% of the amount of the RMD.  If you’ve realized your error before the IRS has notified you, there are a few things you can do to try to resolve the situation.

The very first thing you should do is immediately withdraw the RMD in the amount that you should have in the previous year.  Contact your IRA custodian and request the distribution as soon as possible.

File An Amended Tax Return

Then, if you’ve already filed your tax return for the previous year, fill out an amended return (Form 1040X), and include a properly filled out Form 5329.  If you haven’t filed yet, go ahead and file the Form 5329 with your regular Form 1040 return.

Form 5329 is the form that you use to report additional taxes on your IRA accounts – in this case you’re reporting the fact that you “overaccumulated” by not taking your appropriate RMD.  Include a letter with the return, asking for a waiver of the penalty, explaining that you forgot the RMD but as soon as you realized it you corrected your error by taking the distribution.  The IRS may let you off the hook – it’s easier for them to do this for taxpayers than to hunt you down and send you a bill.

It’s not fool-proof, but it’s the best chance that you have at this stage.  And then figure out a way so that you don’t get into this position again in the future.  For example, set up an automatic distribution plan by having an adequate amount sent to you monthly or quarterly.  Make sure that you adjust this annually to match that year’s RMD.  This way maybe you won’t have this problem next time around.

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication (or in any attachment).

About the author

Jim Blankenship, CFP®, EA

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a financial planning firm providing hourly, as-needed financial planning and advice. A financial services professional for over 25 years, Jim is a CFP professional and has earned the Enrolled Agent designation, a designation that qualifies him as enrolled to practice before the IRS. Jim is also a NAPFA-registered financial advisor, which designates him as a Fee-Only Financial Advisor.

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