What Happens If You Miss Your RMD
If the RMD amount is not distributed by the deadline, then
the IRS assesses a 50% excise tax on the amount not withdrawn.
This is referred to as an excess-accumulation penalty. If you
withdraw only a portion of the RMD amount, the penalty is assessed
on the balance. For example, say your calculated RMD amount for
2004 is $10,000 and you withdrew $5,000. You will be assessed
a 50% excise tax on $5,000.
All Is Not Lost... Maybe
Should you find yourself in the unfortunate predicament
of having to pay this excise tax due to an error, you may request
a waiver from the IRS. Generally, to consider the waiver, the
IRS requires that you have taken or are taking steps, such
as taking the RMD amount as soon as possible, to correct the
error. You must pay the excise tax and then submit a letter
of explanation asking for a waiver with your income tax return.
The excise tax is reported on IRS Form 5329, which may be obtained
at www.irs.gov. If your request is
approved, the IRS will return the excise tax amount to you.