3626. Is there a penalty imposed for failure to comply with IRA required minimum distribution requirements?Nuco Employeercline202014-06-04T13:16:00Z2014-06-04T13:16:00Z12541452Albany Law School123170314Site Map/Individual Retirement Plans/Roth IRA/Distributions/Minimum Required DistributionsSite Map/Individual Retirement Plans/Traditional IRA/Distributions/Minimum Required Distributionsrequired minimum distributions RMD MRD2005-01-25T00:00:00ZTaxFactsDefaultArticleSite Map/Individual Retirement Plans/Quick Clicks/Required Minimum Distributions114860233-00-tf1.xml234.00;#1800;#1814;#1823;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 1What are the minimum distribution requirements for individual retirement plans? What is the effect of failure to meet the requirements?100300.000000000TaxFactsDefaultArticleSBMEDIA\moss-admin2010-01-15T00:19:25Z3626. Is there a penalty imposed for failure to comply with IRA required minimum distribution requirements?A penalty tax is imposed on the payee (IRA owner) if the amount distributed under an IRA for a calendar year is less than the required minimum distribution for the year. The penalty is equal to 50 percent of the amount by which the distribution made in the calendar year falls short of the required amount. The tax is imposed on the payee.IRC Sec. 4974(a); Treas. Reg. §54.4974-1. The penalty generally will be imposed in the calendar year in which the amount was required to be distributed. If the distribution was the first required distribution, and thus was due by April 1 following the calendar year in which the IRA owner reached 70 ½ years old (the required beginning date), the penalty will be imposed in the calendar year when distributions were to begin even though the required distribution was technically for the preceding year.Treas. Regs. §§54.4974-2, A-1, 54.4974-2, A-6.Example: Joan turned 70 ½ on October 26 of 2014. Her first required minimum distribution for 2014 was due by April 1, 2015. Joan did not receive such amount by the April 1 due date. Consequently, Joan will owe a penalty equal to 50% of the amount that should have been distributed, which will be imposed on her 2015 tax return.The penalty tax may be waived if the payee establishes to the satisfaction of the IRS that the shortfall was due to reasonable error and that reasonable steps are being taken to remedy the shortfall.IRC Sec. 4974; Treas. Reg. §54.4974-2, A-7(a).The minimum distribution requirements will not be treated as violated, and, the 50 percent excise tax will not apply, where a shortfall occurs because assets are invested in a contract issued by an insurance company in state insurer delinquency proceedings.Treas. Reg. §1.401(a)(9)-8, A-8.