Uncle Sam wants you to take your required minimum distributions (RMD) from your Individual Retirement Account at just the right time. Not too early. Not too late.
If you make a withdrawal too early - before age 59 1/2 - you'll face a 10% penalty. But that's mild compared to what happens if you fail to take your RMD by the year following the year you turn 70 1/2. That violates the RMD rules, and will get you a whopping 50% penalty. For example, if your RMD was supposed to be $5,000 and you miss the deadline, you'll owe the IRS an additional $2,500 on top of the taxes you would ordinarily pay on the distribution. Uncle Sam doesn't fool around.
The administrator of your IRA should alert you that an RMD is due, but the buck - and the penalties - stop with you, so it's wise to stay on top of the deadlines.
There have been some cases in which the IRS has waived the penalty for a late RMD. If you find you've missed the deadline, you should take the RMD as soon as possible. Submit it, along with IRS Form 5329 (Additional Taxes on Qualified Plans). Attach a letter to the filing explaining why you were late - lost paperwork, health issues, family crisis, hurricane, etc. Also indicate what steps you have taken to ensure your future RMDs will be timely.
The IRS is not known for being "warm and fuzzy," but it doesn't hurt to try appealing to its softer side.
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