How to Request an RMD Penalty Waiver on Form 5329

When a retiree misses an RMD, the first instinct is often to pay the tax and move on. Sometimes that is fine. But section 4974(d) gives the IRS authority to waive the tax entirely, and the request costs nothing beyond a page of explanation.

Here is how to make it.

The legal standard

IRC 4974(d) says that if the taxpayer establishes to the satisfaction of the IRS that the shortfall was due to reasonable error, and that reasonable steps are being taken to remedy it, the IRS may waive the tax for the year.

Two parts, both required:

1. Reasonable error. A plausible, honest reason the distribution was missed.
2. Reasonable steps to remedy. In practice, you have already taken the missed distribution, or you are taking it now and can show it.

This is a different standard from the reasonable cause test for penalties like failure to file. It is generally more forgiving, because it speaks of reasonable error rather than ordinary business care and prudence.

What counts as reasonable error

There is no exclusive list. Explanations that commonly fit the standard include:

• Serious illness, hospitalization, or cognitive decline of the account owner.
• Death of a spouse or family member who handled the finances.
• A custodian's mistake: a missed automatic distribution, a wrong calculation, a lost instruction.
• Reliance on incorrect advice from a financial professional.
• Confusion over the changed RMD ages or the inherited IRA rules.
• An account forgotten after a merger or transfer between institutions.

"I did not want the income" is not reasonable error. Neither is deliberate deferral to manage brackets. Be honest. An explanation that falls apart under a follow-up question does more harm than a plain one.

Step one: take the distribution

Do this first. The "reasonable steps to remedy" prong is much easier to show when the money has already come out. Ask the custodian to process the missed amount as a separate distribution and keep the confirmation. Have tax withheld on Form W-4R if needed. The distribution is taxable in the year you take it.

For IRAs, you can take the combined shortfall from any of your IRAs. For a 401(k) or 457(b), it must come from the plan that had the shortfall. Inherited IRAs are computed and taken separately from your own IRAs.

Step two: complete Form 5329

Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, has a part for the excise tax on excess accumulation in qualified retirement plans. You enter the minimum required distribution for the year, the amount actually distributed, and the shortfall.

The current Form 5329 instructions explain how to request the waiver. As the instructions have described it, you enter "RC" and the amount you want waived in parentheses on the dotted line next to the shortfall line, subtract that amount from the shortfall, and compute any tax on the remainder. If you are requesting a full waiver, the tax for that year comes out to zero. Follow the instructions for the year of the form you are filing, since line numbers change.

File a separate Form 5329 for each year with a shortfall. Married couples each file their own for their own accounts.

Step three: write the explanation

Attach a statement. Keep it short, factual, and in plain English. A good explanation covers four things:

1. Which account and which year.
2. Why the distribution was missed, with dates.
3. When you discovered it.
4. What you did to fix it, with the date and amount of the corrective distribution.

Attach supporting documents where they exist: a hospital discharge summary, a death certificate, a custodian's letter admitting the error, the corrective distribution confirmation. One page plus documents is usually enough.

Keep the explanation consistent

If you are also requesting relief from other penalties for the same years, such as a failure-to-pay penalty, make sure the facts you give for each request match. An explanation that says you were hospitalized all year for one penalty and traveling for another undermines both. The IRS reads the whole file.

Step four: file it

If the year is the current filing year, attach Form 5329 and the statement to your Form 1040. For prior years where you already filed a 1040, you can file Form 5329 by itself for each year. The instructions explain where to send a standalone form and what to write at the top. Do not send payment for the waived amount.

If the IRS grants the waiver, you usually hear nothing. If it denies the request, it will send a notice proposing the tax. At that point, the 10 percent correction rate in section 4974(e) may still apply if you are within the correction window. See the missed RMD penalty.

The statute of limitations angle

SECURE 2.0 changed IRC 6501(l)(4) so that, for the 4974 tax connected to an individual retirement plan, your income tax return for the shortfall year counts as the return that starts the assessment period. If you were not required to file a return, the period starts on the date it would have been due. Even so, filing Form 5329 puts the issue squarely on the record, claims the reduced rate or waiver, and leaves no doubt about what you reported.

When a waiver request is weak

Some facts make the request harder. If you knew about the RMD and chose not to take it, the error was not reasonable. If you missed several years after the IRS or a custodian reminded you, the explanation needs more than "I forgot." If you have not taken the missed distribution and do not plan to, the remedy prong fails outright. In those cases, the realistic goal may be the 10 percent rate under section 4974(e) rather than a full waiver, and the deadline for that rate matters. Request the waiver anyway if you have a good-faith basis, and be prepared to pay the reduced rate if it is denied.

A sample explanation

Here is the kind of statement that works, adapted to your facts:

"I am requesting a waiver of the section 4974 excise tax for 2025 for my IRA held at a local credit union (account ending 1234). My husband managed our retirement accounts until his death in March 2025. I did not know this account required a separate distribution. I discovered the shortfall in February 2026 when reviewing his records. On February 20, 2026, I took a distribution of $2,540, the full 2025 required amount. A copy of the distribution confirmation and his death certificate are attached. I have set up automatic annual distributions to prevent this in the future."

The facts in that example are invented for illustration. Yours must be your own, and true.

Preventing the next one

• Consolidate small IRAs where it makes sense, using trustee-to-trustee transfers.
• Set up automatic RMDs with each custodian.
• Calendar December 1 to confirm every account has paid its RMD.
• Recheck your applicable age. See RMD ages 73 and 75.
• Consider qualified charitable distributions if you give to charity anyway. See QCDs and RMDs.

Next step

Take the distribution, prepare Form 5329 for each year, and write the explanation. If the IRS has already proposed the tax, or you have several years of missed RMDs across multiple accounts, call (813) 229-7100. The firm's page on penalty abatement explains relief for other penalties that may be on the same years.