Key Takeaways
- A 74-year-old whose traditional IRA held $1,000,000 on Dec. 31, 2025, must withdraw $39,216 by Dec. 31 of this year.
- If they miss it, the IRS charges a 25% excise tax on the amount they didn’t withdraw. In this case that’s $9,804.
- Taking out the missed amount and reporting the tax on a return within the correction window cuts the rate to 10%, or $3,922. The IRS may also waive the tax entirely for reasonable error.
- Ask for the withdrawal well before Dec. 31, because a request made on the last day may not leave the account until January.
If you’re already taking required minimum distributions from your IRA, this year’s has to come out by Dec. 31, which is now less than two months away. Miss it, and you owe a separate tax on whatever you didn’t withdraw.
The good news is that the tax is half what it used to be, and you can cut it by more than half again if you catch the mistake yourself. You might even get it waived.
Andy Panko, host of the Retirement Planning Education podcast, spent part of his year-end tax planning episode this week on getting withdrawals done in time to count for 2026. His advice: “do not, do not, do not wait until December 31st.”
A $1 million IRA and a missed deadline
Let’s take a hypothetical: you turn 74 this year, and your traditional IRA held $1,000,000 on Dec. 31, 2025. Your required minimum distribution for this year comes to $39,216, and it has to be out of the account by Dec. 31. Now say December gets away from you and the withdrawal never happens. The IRS charges its own excise tax on that shortfall, and how much you pay comes down mostly to how fast you fix it.
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The IRS used to take half
Required minimum distributions start at 73. The IRS lets you push the first one to April 1 of the following year, and every one after that is due by Dec. 31. The amount is last Dec. 31’s balance divided by the figure for your age on the Uniform Lifetime Table in IRS Publication 590-B. For this year’s withdrawal at 74, that figure is 25.5. (That table is for owners whose sole beneficiary isn’t a spouse more than 10 years younger.) The deadline covers traditional, SEP and SIMPLE IRAs, workplace plans like 401(k)s, 403(b)s and governmental 457(b)s, and beneficiaries who must take RMDs from inherited accounts.
Miss one, and the IRS can charge a 25% excise tax on the amount you didn’t take out. That rate replaced a 50% rate for tax years starting in 2023, so you may still see the old figure quoted. Panko remembered the 50% on his show, but he said he wasn’t sure of today’s rate and guessed 20%. It’s 25%.
Fixing it saves $5,882
For our 74-year-old, $1,000,000 divided by 25.5 is a $39,216 required withdrawal. Skip all of it, and 25% of that shortfall is a $9,804 tax.
The IRS drops the rate to 10% if you take out the missed amount and file a return reporting the tax during what it calls the correction window. That makes the bill a “just” $3,922, or $5,882 less. And if the IRS accepts that the miss came from reasonable error and that you’re taking reasonable steps to fix it, it may waive the tax entirely.
For the missed $39,216, the three outcomes look like this:
| What happens | Rate | Excise tax |
|---|---|---|
| Missed and not corrected in time | 25% | $9,804 |
| Withdrawn and reported within the correction window | 10% | $3,922 |
| Waived for reasonable error | 0% | $0 |
Even the middle row is real money for a missed date. And you owe the ordinary income tax on the $39,216 itself in every row, on top of the excise tax.
Don’t leave it for New Year’s Eve
If this year’s withdrawal is still ahead of you, Panko’s worry is how long your custodian takes to process it. A request put in at 3 p.m. Eastern on Dec. 31 may not leave the account until early January, depending on the custodian, the holiday and the weekend. He said he frankly doesn’t know which tax year that would count for. He’d rather you leave a buffer of a week or more.
If you’ve already missed one, you report the tax on Form 5329. A waiver request is the same Form 5329 with an explanation attached. Panko said the IRS tends to be lenient with waivers, since plenty of retirees simply don’t know the details of the rules. The window for the 10% rate ends no later than the last day of the second tax year that begins after the year of the tax. For a miss this year, that’s Dec. 31, 2028. The window ends sooner if the IRS mails you a deficiency notice or assesses the tax first, so the safest time to take out a missed amount is as soon as you spot it.
Next year’s withdrawal is bigger
The table’s figure shrinks every year: it’s 24.6 at 75. So if your IRA still held $1,000,000 on Dec. 31, 2026, next year’s required withdrawal would be $40,650, and a miss would cost more too. Of course, the markets will set that balance, and the withdrawal will move with it.
Frankly, almost nobody who catches the miss should end up paying the full 25%. But the cheapest way through this is to take the money out in early December, so Form 5329 never comes up.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
