Failure to take the full RMD amount by the required deadline can result in a substantial penalty. The IRS imposes an excise tax equal to 50% of the amount not withdrawn as required. For example, if your RMD for the year was $10,000 and you only withdrew $6,000, you would owe a 50% penalty on the $4,000 shortfall, which is $2,000. This penalty is in addition to the regular income tax owed on the distribution. To avoid the penalty, it’s crucial to take the full RMD amount by the deadline each year. Refer to the 26 U.S. Code § 4974 for more details on the RMD penalty.
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