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Imagine getting a note like this:
“My mom is 76 and her memory is slipping. I finally went through her mail and realized she never took the required withdrawal from her IRA last year. She hasn’t taken this year’s either. Is the IRS going to hit her with a 25% penalty?”
Let’s call the writer Karen. She’s not a real person, but her situation is. The Alzheimer’s Association estimates 7.4 million Americans 65 and older are living with Alzheimer’s in 2026.(1)
I’ve been a CPA since 1981, and here’s the short answer for Karen: Don’t panic. This is fixable, and the penalty may shrink to zero.
The rules first. The IRS generally requires owners of traditional IRAs to start taking required minimum distributions, or RMDs, at age 73.(2) Each year’s RMD is figured from the account balance at the end of the prior year.(3)
Miss one, and the shortfall can be hit with a 25% excise tax. That drops to 10% if the RMD is timely corrected within two years.(2) And the IRS can waive it entirely if the miss was a reasonable error and you’re fixing it.(2)
Here are the 5 steps I’d take in Karen’s shoes.
1. Take the missed withdrawal now
The IRS wants to see that “reasonable steps are being taken to remedy the shortfall,” so take last year’s missed amount now.(2) And if the IRS turns down a waiver, correcting it within the two-year window means a 10% excise tax instead of 25%.
Here’s the math on a hypothetical $12,000 missed RMD. At 25%, the penalty is $3,000. Timely corrected within two years, it’s $1,200. Waived, it’s zero.
Untangling a parent’s IRAs, taxes and withdrawals is a lot to take on while you’re also worried about her health.
And this is exactly the time to get some outside help. Or at least consider it.
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2. Ask the IRS to waive the penalty
Don’t skip this step. It’s the one that can save the most.
The IRS says to request a waiver, you file Form 5329 and attach a letter of explanation. You’ll need to show the shortfall was due to reasonable error and that “reasonable steps are being taken to remedy the shortfall.”(2)
My view: a parent’s declining memory, documented and explained plainly, along with proof the money has now come out, is exactly the kind of story that letter is for. Be specific about dates and amounts.
Quick gut-check — if your money advice is coming from random online influencers, you’re playing a dangerous game. I’ve been a CPA since 1981 and writing about money since before the internet existed. Sign up for the free Money Talks Newsletter and get expert advice that’s been tested by time.
3. Get the legal authority to help
Karen can’t fix any of this if the bank won’t talk to her. A durable power of attorney gives an agent “legal authority to make decisions about” a person’s money or property, as a Consumer Financial Protection Bureau guide for agents puts it.(4)
If Mom is still competent to sign, now is the time. And while you’re getting paperwork in order, look at the whole estate plan. Trust & Will lets you create a will online for $199, or a trust starting at $499.
If you don’t have one yet, get one.
4. Don’t forget this year’s withdrawal
Fixing last year doesn’t take care of this year. Mom’s 2026 RMD is due by Dec. 31.(2)
That means she could take two years’ worth of withdrawals in 2026. The IRS says withdrawals are included in your taxable income, except any part that was taxed before.(3) So plan for a bigger tax bill next spring, and consider having taxes withheld from the withdrawals.
5. Put next year on autopilot
Once the mess is cleaned up, make sure it doesn’t happen again. Ask the IRA custodian whether it can send Mom’s RMD automatically each year, with taxes withheld.
And put a reminder on your own calendar for early December, just in case.
My honest take
Karen’s mom didn’t do anything wrong on purpose. She let a once-a-year chore slip, which is easy to do for anyone, but especially as memory fades.
The IRS penalty sounds terrifying, but the agency offers a way out for honest mistakes. Take the money out, write the letter, and get the paperwork to help her going forward.
The bigger lesson is for the rest of us. Have the money talk with your parents before memory becomes an issue, not after.
Sources: 1. Alzheimer’s Association; 2. IRS; 3. IRS; 4. Consumer Financial Protection Bureau
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