Q:

What is the IRS penalty for not withdrawing an IRA distribution on an annual basis?

A:

Quick Answer

The penalty for not taking a Required Minimum Distribution from a traditional IRA annually after reaching age 70 1/2 is a 50 percent tax of the amount not withdrawn according to the IRS. Roth IRAs do not require withdrawals until after the death of the account owner.

Continue Reading

Full Answer

The penalty for not withdrawing the full RMD amount may be waived if it is established that not withdrawing the RMD was due to reasonable error and steps are being taken to remedy the error according to the IRS. To qualify for the waiver, Form 5329 must be filed with a letter of explanation. RMDs are taxed at the account owner's income tax rate, excepting amounts that were already taxed or can be received tax-free.

Learn more about Financial Planning
Sources:

Related Questions

Explore