If an IRA owner died this year without taking their full required minimum distribution, the beneficiary generally has to withdraw whatever was left of that RMD by December 31 of the same year. Miss that deadline and the IRS charges a 25% excise tax on the shortfall, though the penalty can be trimmed to 10% by correcting quickly, or waived entirely with the right paperwork. An RMD not taken in the year of death is one of the more common surprises heirs face, and the fix is usually straightforward once you know the rule applies to your situation.
When a Year-of-Death RMD Actually Applies
The obligation exists only if the owner died on or after their required beginning date. That date is April 1 of the year after the owner turns 73. For anyone born in 1960 or later, the trigger age rises to 75 starting in 2033.1Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs)
If the owner died before reaching that milestone, there is no year-of-death RMD to worry about. A 68-year-old who dies in June leaves no shortfall behind, because they hadn’t yet been required to take anything. A 78-year-old who dies in June without having drawn their full annual amount leaves the balance of that RMD for the beneficiary to clear by year-end.
Roth IRAs are a different story: they carry no lifetime RMDs for the owner, so there is never a year-of-death RMD on a Roth, no matter the owner’s age.2Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
Figuring the Amount That Still Has to Come Out
The calculation treats the owner as if they had lived the whole year. Take the account balance as of December 31 of the prior year and divide it by the life expectancy factor from the IRS Uniform Lifetime Table.3Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) If the sole beneficiary was a spouse more than 10 years younger than the owner, the Joint Life and Last Survivor Expectancy Table applies instead.
Then subtract whatever the owner had already withdrawn that year. If the full-year RMD was $15,000 and the owner had taken $5,000 before dying, $10,000 is what still needs to come out. Movements in the account’s value after the date of death do not change this figure. The number is fixed at the start of the year.
More Than One IRA
When the deceased owned several traditional IRAs, a separate RMD is calculated for each. The beneficiary can add those amounts together and pull the total from any one of the inherited accounts, as long as every account came from the same decedent.1Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs) This aggregation trick works only for traditional IRAs. A 401(k) or other employer plan has to be satisfied from that plan alone.
Who Takes It, and By When
Whoever inherits the account is responsible for taking the withdrawal and reporting it as income. When the estate is the beneficiary, the executor handles it. When several people inherit shares, each is responsible for their proportional piece of the RMD. Two beneficiaries splitting the account 50/50 would each cover half of the remaining amount.
The deadline is December 31 of the year the owner died.1Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs) There is no automatic extension for late-year deaths. A beneficiary whose parent dies in November has only a few weeks to identify the shortfall, contact the custodian, and get the distribution processed. The IRS does not build extra time into the calendar for tight timelines, though the penalty waiver process does exist for exactly this kind of situation.
The distribution is ordinary income to the person who receives it, taxed at that person’s marginal rate. It cannot be rolled into another retirement account, because RMDs are never eligible for rollover.
The 25% Penalty and How to Shrink It
If the year-of-death RMD does not come out by December 31, the IRS imposes a 25% excise tax on the amount that should have been distributed.4Office of the Law Revision Counsel. 26 U.S. Code 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans On a $10,000 shortfall, that is a $2,500 excise tax on top of the ordinary income tax that will eventually apply to the distribution itself.
SECURE 2.0 cut the penalty from the old 50% rate for tax years beginning after December 29, 2022, and it built in a further discount for prompt correction. Withdraw the missed amount and file during the correction window and the rate drops to 10%.4Office of the Law Revision Counsel. 26 U.S. Code 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans The window runs from the date the tax is imposed until the earliest of three events: the IRS mails a notice of deficiency, the IRS assesses the tax, or the last day of the second tax year after the penalty year. In practice, most people have roughly two years to fix the mistake and claim the lower rate.
Asking for a Full Waiver
The IRS can waive the penalty entirely if you can show the shortfall was due to reasonable error and that you have taken steps to correct it. You request the waiver by filing Form 5329 with your tax return and attaching a letter explaining what happened.2Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs These waivers are granted regularly when the explanation is honest and straightforward. A beneficiary who did not know about the year-of-death obligation and pulled the money out as soon as they learned about it has a strong case. Take the corrective distribution first, then file the waiver request.
How the Distribution Gets Reported
The IRA custodian issues Form 1099-R to the person who received the money. The gross distribution goes in Box 1, the taxable amount in Box 2a, and Box 7 shows distribution code 4, which flags the payment as a death distribution.5Internal Revenue Service. Instructions for Forms 1099-R and 5498 Code 4 exempts the payment from the 10% early withdrawal penalty regardless of the beneficiary’s age.6Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
The recipient reports the taxable amount on Form 1040 for the year the money was actually received. If the RMD came out late and the excise tax applies, Form 5329 goes with the return for the year the RMD was originally due, whether you are paying the 25%, claiming the 10% reduction, or asking for a full waiver.
One further point worth flagging for beneficiaries who inherited through an estate that paid federal estate tax: an income tax deduction may be available under the income in respect of a decedent rules, offsetting the double hit of estate tax and income tax on the same retirement dollars. The calculation is genuinely complicated and depends on how much IRD was included in the taxable estate, so a tax professional is usually worth the fee in that scenario.