Missing a required minimum distribution (RMD) can trigger a 25% penalty from the IRS—an amount that can wipe out a year’s retirement savings in a flash.
But there’s a surprisingly simple workaround that the agency has been granting for years: file Form 5329 and attach a concise two‑paragraph explanation, and the penalty is often erased.
In my experience the process feels almost bureaucratic, yet the results are real.
Why the 25% penalty hits hard
The tax code treats an RMD miss as a “failure to distribute” and automatically slaps a 25% excise on the shortfall, calculated on the amount that should have been withdrawn.
For a 70‑year‑old with a $200,000 IRA, that’s $50,000 in extra tax—hardly a rounding error.
And the penalty isn’t just a number; it compounds with ordinary income tax, pushing many retirees into a higher bracket.
How to file Form 5329 correctly
The IRS Form 5329, Part I, line 1 asks for the missed RMD amount and the tax owed.
Below that, a space is provided for an explanation. Keep it to two short paragraphs: first, state the factual mistake (e.g., “I failed to take my 2023 RMD by the deadline due to a banking error”). Second, describe the corrective action (e.g., “I withdrew the full amount on March 5, 2024, and will adjust future distributions accordingly”).
Because the IRS looks for reasonable cause, a brief, honest note usually suffices.
Not what we expected. A close call.
Once the form and letter are assembled, mail them to the address listed in the Form 5329 instructions or fax them if you have an electronic copy.
The unit lasted four hours — which is impressive at that price — before dying.
After filing, the IRS typically sends a notice within 30 days confirming the waiver.
The penalty may be waived if the taxpayer demonstrates reasonable cause, according to IRS guidance.
For more on navigating tax forms, see the official Form 5329 page. And if you’re curious about how other tech‑savvy retirees manage their finances, check out Open‑Source Apps Worth Paying for in 2026 and Advanced Navigation’s new Huntsville facility.
Key takeaway
- Missing an RMD triggers a 25% excise on the omitted amount.
- Form 5329 plus a two‑paragraph letter often leads to a waiver.
- Submit the form promptly; the IRS usually responds within a month.
- Keep records of the withdrawal and the correspondence for future audits.
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