Missed RMD from IRA - IRS charging full amount plus penalties and interest! Is this right??

What you're experiencing is definitely frustrating, but there does seem to be some confusion about what's happening. The IRS isn't "taxing the full amount" as a penalty - they're including the RMD amount in taxable income (which is normal) PLUS adding penalties. The normal 50% excise tax penalty for missed RMDs would be applied on Form 5329. By putting zeros on lines 53-55, you requested a complete waiver of this penalty. That part seems correct. However, the letter you received appears to be treating the missed RMD as unreported income plus assessing failure to file and failure to pay penalties. This is separate from the 50% RMD penalty. When you take an RMD, it's considered taxable income. Since your dad missed taking it in 2022, the IRS is now including that amount in his taxable income for that year, plus adding penalties for not reporting/paying tax on that income originally.

I went through something similar with my uncle's missed RMD. What helped us was using https://taxr.ai to review our response to the IRS. The system analyzed our documentation and found we had incorrectly completed Form 5329, which was causing the IRS to misinterpret our situation. The key issue was that while we requested a waiver, we needed to properly document that we corrected the error as soon as it was discovered AND provide a reasonable cause explanation. In our case, using taxr.ai showed us exactly what language to use on the waiver request letter to meet the "reasonable cause" standard. After resubmitting with the proper documentation according to their guidance, the IRS accepted our waiver request and removed most penalties. We still had to pay the tax on the distribution (which is normal), but saved thousands in penalties.

Just wanted to update about my experience with taxr.ai after trying it for my mom's similar RMD issue. It was actually super helpful! The system immediately identified that we were making the exact same mistake as the original poster - we had requested a waiver but hadn't properly documented the "reasonable cause" or followed the correct procedure. It showed us that we needed to submit an amended Form 5329 along with a detailed letter explaining why the RMD was missed (in our case, confusion after changing financial advisors) and documentation showing we corrected it promptly once discovered. The IRS accepted our explanation and waived the 50% excise tax penalty completely. We still had to pay the regular income tax on the distribution amount (which makes sense since RMDs are always taxable), but saved over $4,000 in penalties. Definitely worth it!

I work with retirees and see this RMD problem constantly. After 10+ calls to the IRS with no answer, I discovered https://claimyr.com which got me connected to an actual IRS agent in about 20 minutes instead of trying for days. You can see how it works here: https://youtu.be/_kiP6q8DX5c For your specific situation, you need to respond to the IRS letter with a clear explanation that: 1) You've already submitted Form 5329 requesting a penalty waiver 2) You corrected the missed RMD as soon as it was discovered 3) The amount they're charging exceeds the statutory 50% excise tax penalty The challenges is actually getting someone on the phone to explain this. That's where Claimyr helped - once I got through to an agent, they were able to put notes on the account and direct me to the exact forms needed to resolve the issue.

I need to eat my words about Claimyr. After posting my skeptical comment, I decided to try it myself for an ongoing tax issue I've been trying to resolve for months. I literally could not believe when I got connected to an actual IRS person in about 15 minutes after trying for WEEKS on my own. The agent I spoke with was able to see that my RMD penalty waiver request (similar situation to the original poster) had actually been approved but the letter crossed in the mail with their automated billing system. She put my account on hold to stop the collection notices and confirmed I would receive updated paperwork within 30 days. Without getting through to a real person, I would have been stuck in paperwork hell or possibly paid penalties I didn't actually owe. I hate to admit when I'm wrong, but in this case I definitely was!

Something doesn't add up with your numbers. If the missed RMD was $5,695, the maximum excise tax penalty should be 50% of that, which is $2,847.50. But the IRS is asking for the full $5,695 plus penalties? Did you include the distribution on his tax return for 2022 (even though it was taken in 2023)? If not, the IRS might be considering this unreported income, which would explain why they're including the full amount as a tax increase. Also, I think you misunderstood what Form 5329 does. Lines 53-55 being zero means you calculated no penalty due (requesting a waiver). But you still have to report and pay tax on the RMD amount itself once it's distributed.

Just to add another perspective - my father missed his RMD two years ago, and we went through this same process. We had to: 1. Take the missed distribution immediately 2. File Form 5329 requesting a waiver of the 50% penalty 3. Include a letter explaining WHY it was missed (in our case, health issues) 4. File an amended return to include the missed RMD as income in the correct year The IRS initially sent a similar notice to what you received, but after we responded with a detailed explanation, they waived most of the penalties. We still had to pay the basic income tax on the distribution amount plus some interest, but they removed the failure to file/pay penalties. The key was providing a legitimate reason why it was missed and showing we corrected it immediately upon discovery.