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Missed RMD, do they have to correct the mistake and take the withdrawal in order to get a waiver of penalty?

Level 15
Level 15

So I was taught in order to get the penalty waived on a missed RMD, you need to correct the mistake and take the distribution AND make sure you have a plan in place so that it doesnt get missed again in order to get the penalty waived....an experienced EA has informed me that this isnt the case, you DON'T need to take that missed distribution at all. 

I find this hard to believe that you can waive the penalty and pay no tax on that missed distribution at all.

And no, I dont wanna look it up, ..its so rare that an RMD is missed by my clients, Im just curious if Im the only one misinformed or not....anyone know off the top of their head?


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3 Comments 3
Level 15

Lisa you are exactly correct. I had this happen this tax season. I had the client immediately take out the 2021 distribution and immediately take out a separate 2022 distribution. I explained this to the IRS on the appropriate explanation form statement to request a waiver of the penalty. If you don't hear from the IRS then that means they accepted the explanation and there is no penalty. Just my opinion

Level 13

I was taught the same.  I guess maybe it depends on how you define "remedy the shortfall".  I would take that to mean that you "catch up" in the year of discovery.  But since we can no longer decipher "under 24" or "you" in the tax code on our road to Idiocracy, who knows how one might interpret "remedy".

From the instructions:

Waiver of tax for reasonable cause.
The IRS can waive part or all of this tax if
you can show that any shortfall in the
amount of distributions was due to
reasonable error and you are taking
reasonable steps to remedy the shortfall.



Level 7

I agree with all of the above.  They money has to be removed or it will still be penalized the next year and they won't forgive the penalty.