Section 4974 Excise Tax · IRS Rules · June 2026
If you were required to take an RMD from an inherited IRA and took less than required, the IRS can charge an excise tax on the shortfall. For taxable years beginning after December 29, 2022, that penalty is generally 25% of the missed amount, and it can drop to 10% if you correct it within the IRS correction window. The excise tax is reported on Form 5329.
Most people use "inherited IRA RMD penalty" to describe the IRS excise tax for missing a required minimum distribution from an inherited IRA. This is not the same thing as the 10% early-withdrawal tax that applies in other retirement-account situations. If the IRS treats your situation as an RMD failure that generates a Section 4974 excise tax on excess accumulation, the additional tax is reported on Form 5329 as directed by its instructions.
It helps to separate three different tax ideas:
An inherited IRA does not always create the same RMD rules for every beneficiary. Whether you owe an RMD depends on facts like:
Depending on your beneficiary classification and the decedent's death timing, you may not have an annual RMD requirement, but you generally still must satisfy required distributions under the applicable inherited IRA framework by specific deadlines.
Before worrying about a penalty, check these four items:
If you were required to take an RMD and took less than required, the IRS calculates the penalty on the shortfall:
Shortfall = Required RMD − Amount actually distributed
Excise tax = Penalty rate × Shortfall
| Item | Amount |
|---|---|
| Required inherited IRA RMD | $20,000 |
| Amount actually withdrawn | $12,000 |
| Shortfall | $8,000 |
| 25% excise tax | $2,000 |
| 10% rate if corrected in time | $800 |
That is why the timing of the correction matters so much.
The IRS correction window is the period during which a missed RMD can be corrected and the excise tax reduced from 25% to 10%. The IRS generally describes it as ending at the end of the second calendar year following the first year beginning after the year in which the failure occurred.
IRB 2024-19 explains the IRS correction-window concept that can reduce the Section 4974 excise tax, which is reported on Form 5329.
The correction window is about when the missed amount is fixed, not whether the mistake was accidental. The reduced rate is not automatic. You need the correction to happen inside the IRS timing rule.
There is no blanket inherited IRA RMD penalty waiver that wipes out the penalty for everyone. The IRS has provided targeted relief in certain situations, but that relief is narrow and fact-specific.
For example, the IRS beneficiary guidance references relief under Notice 2022-53 for certain beneficiaries subject to the 10-year rule who failed to take RMDs for 2021 and 2022. That is not the same thing as a general waiver for all missed inherited IRA RMDs in every year.
If you see online claims about a "waiver," treat them carefully. You still need to check:
If the IRS treats your situation as an RMD failure that generates a Section 4974 excise tax on excess accumulation, the additional tax is reported on IRS Form 5329 as directed by the IRS instructions. The form instructions explain the penalty rate and how the reduced rate can apply if you meet the correction rules.
The IRS cares about the correct amount, the correct year, and the correct timing.
The tax rule does not change just because the inherited IRA holds gold instead of mutual funds or cash. The IRS distribution requirement is based on the IRA rules, not the asset mix inside the account.
What can change is the operational side:
Operational timing can still affect whether you meet the distribution deadline, which affects excise-tax exposure if an RMD was required.
If you think you missed an inherited IRA RMD, do not guess. Work through this order:
The goal is to fix the problem correctly and as soon as possible, because the difference between a 25% and 10% excise tax can be large.
A surviving spouse may have different inherited IRA options than a non-spouse beneficiary. The RMD result depends on the path chosen and the facts of the account.
Non-spouse beneficiaries are often subject to a distribution framework that can include the 10-year rule, but the exact RMD obligation depends on the IRS rules that apply to the account owner's death date and the beneficiary category.
These situations can be more complex, and the distribution rules may depend on how the account was titled and who the IRS treats as the beneficiary.
The owner's death relative to their required beginning date can change the distribution framework. That timing detail matters before you ever get to the penalty question.
Generally, for taxable years beginning after December 29, 2022, the excise tax is 25% of the shortfall. If you correct the missed RMD within the IRS correction window, it may be reduced to 10%.
It is the amount that should have been distributed but was not — the shortfall the IRS uses to calculate the excise tax. The IRS Form 5329 instructions use the term 'excess accumulation' for this missed amount.
Sometimes the penalty can be reduced if you correct within the IRS correction window, but taking it late does not automatically erase the tax. You still need to file Form 5329 and address the excise tax reporting.
No. The IRS has provided targeted relief in some specific situations (such as Notice 2022-53 for 2021–2022 misses), but there is not a blanket waiver for everyone.
No. The inherited IRA RMD penalty is a Section 4974 excise tax on 'excess accumulation' — the amount not distributed. It is separate from the 10% early distribution tax that applies to premature withdrawals from retirement accounts.