Questions and Answers

The penalty for not taking an RMD is equal to 50 percent of the RMD amount not taken. If the RMD amount is $1,000, the penalty for failure to take it is $500. The IRA owner reports such a failure by filing the IRS Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, Part VIII, with his/her federal income tax return. The IRA owner may attach a letter of explanation indicating the reason for failure to take the RMD by the deadline and identifying the steps taken to correct the error. The IRS may waive the penalty if failure to take the RMD is due to a reasonable cause. An IRA owner in this situation should seek assistance from a tax professional.