The IRS missed RMD Penalty is 50% of what you were supposed to withdraw and you pay taxes on the full RMD.
Missing a required minimum distribution (RMD) from your IRA can be devastating and costly. Keep in mind the IRS missed RMD Penalty is 50% of the MISSED required distribution amount. Imagine you’re required minimum distribution (RMD) is $10,000 for a year and you forgot to take the distribution. What might the impact of this be?
Let’s look at this:
$10,000 was what you were to take out of your IRA
$5,000 IRS missed RMD penalty!
$3,500 is the taxes on the whole amount, assuming 35% for federal and state taxes
1,500 is all you get after that mistake and paying the IRS missed RMD penalty!
I’m trained by Ed Slott and his team. Ed Slott is who the Wall Street Journal calls when they have questions about IRA’s, 401(k)s and pensions. I’m what Ed Slott calls a Master Elite Advisor* – simply put, I know more about IRAs and how to avoid making mistakes than any advisor you are likely working with.
How do we fix the IRS missed RMD penalty issue? It might seem scary at first. We have a comprehensive checklist system that we use. One of the checklists allows us to work with you to correct this issue and POSSIBLY even avoid the penalty. You will always have to pay your taxes – can’t help you there!
Get our guide, “Fixing a missed RMD in 5 Easy Steps” – fill out this form:
Overview of calculating an RMD
Take the owner’s age as it would be at the end of the year your doing the calculation for. Then, you locate their remaining age expectancy in the IRS life table. You then locate the balance of the account on December 31, of the year before the current year (assuming you are calculating the RMD for this year).
You can also request our RMD Calculation guide