The IRS will usually forgive a missed withdrawal, if you ask properly

Figures relate to tax year 2025-26 (UK) · 2025 (US)

An American in Britain turns 73 and nothing happens. No letter, no reminder, no call.

The provider still holds an address from a decade ago. Meanwhile a required withdrawal has come and gone, and a charge has attached to it.

Form 5329 is where that charge is reported, and it is also where you ask for it to be waived. However, the asking has to be done properly.

Key takeaways

• Form 5329 reports extra taxes on retirement and savings accounts.
• A missed required withdrawal now carries a 25% excise charge.
• Correcting it quickly cuts that charge to 10%.
• You can ask for a full waiver, and the IRS often grants it.
• Take the missed amount out before you file the form.
• Form 5329 can be filed on its own for a year you already filed.
• The 10% early withdrawal penalty has its own exceptions.
• Living abroad changes none of the deadlines involved.

What is Form 5329?

A short form for additional taxes on favoured accounts. It handles missed withdrawals, early withdrawals and excess contributions in one place. Each part stands alone, so most people complete a single section and leave the rest blank entirely.

According to IRS guidance on the form, it attaches to your return or stands alone.

It is a penalty form, not an income form.

What is a required minimum distribution?

A withdrawal the law forces you to take. Once you reach the starting age, currently 73, you must draw a minimum from most retirement accounts each year. The figure comes from your balance at the end of the prior year and a published life expectancy table.

Our guide to US retirement accounts in the UK covers the tax on them.

The first one can be deferred to April of the following year.

What is the charge for missing one?

An excise charge of 25% of the amount you should have taken. That figure replaced a far harsher 50% charge, and it falls again where you act quickly. It applies to the shortfall rather than to the whole account, which limits the damage.

A $20,000 shortfall therefore attracts $5,000 before any relief.

The charge repeats for each year you miss.

Can the charge be reduced?

Yes, and most people qualify. Correcting the shortfall inside a two year correction window drops the rate from 25% to 10%. So a withdrawal taken promptly after you notice costs a fraction of one left sitting there.

Speed is worth more here than any argument.

Take the money out first, then deal with the paperwork.

How do you ask for a waiver?

You complete the relevant part, enter zero as the tax owed, and write a short statement explaining what happened. The instructions ask you to note the request on the line itself. Then you attach the explanation and file it. Nothing is paid up front.

Our guide to reasonable cause penalty relief covers the wider principle.

Silence from the IRS afterwards usually means acceptance.

What counts as a good reason?

Something outside your control, described plainly. Bad advice from the provider, a serious illness, an address that was never updated or a death in the family all read well. What fails is a vague claim that you simply did not know the rule existed.

Say what happened, when you noticed and what you then did.

Three sentences beat three pages every time.

Do you pay first and claim it back?

No, and that is the part people get wrong. The waiver request goes on the form with nothing paid, because the IRS considers the request before it assesses anything. Paying first turns a simple request into a refund claim instead.

In our practice that mistake adds months to a straightforward fix.

Follow the instructions literally on this one.

Which years do you fix?

Every year with a shortfall, each on its own form. The charge attaches year by year, so three missed years means three filings. Each one carries its own explanation, though the wording can repeat where the cause was the same.

Use the form for the year in question, not the current one.

Old versions are still available to download.

What if you missed several years?

Take the whole shortfall out now, then file for each year. Doing it in one movement shows good faith and starts the correction window immediately. A staggered catch-up looks like hesitation and gives the IRS less to approve.

Our guide to amending a US return covers the related corrections.

Most multi-year cases we see are waived in full.

A worked example

Take an illustrative example. An American living in Edinburgh reaches 73 with an individual retirement account her former employer's provider still holds.

Statements go to a Chicago address she left in 2014, so no reminder reaches her. Two years pass.

The shortfall across both years is $31,000, which at 25% would mean $7,750 in charges.

She withdraws the full amount, files for each year with a short explanation, and the charge is waived.

Two charges, one form

Does living abroad change the deadline?

Not for the withdrawal itself. The money must leave the account by 31 December whatever country you live in, and the automatic June filing date for expats does not move that. So the two deadlines sit months apart and people conflate them.

Our guide to US tax deadlines for expats covers the filing dates.

December is the date that matters here.

What about an early withdrawal?

Taking money before 59 and a half normally adds 10% on top of the income tax. That charge sits in a different part of the same form. A string of exceptions exists, and several of them apply as easily abroad as at home.

The provider's coding on the statement is often wrong.

You claim the exception yourself rather than relying on it.

Which exceptions apply from Britain?

Most of the useful ones, because they turn on your circumstances rather than your address. Disability, substantial medical costs, a series of equal payments and certain first home purchases all qualify. Nothing in the list excludes somebody living overseas.

Our guide to health savings accounts in the UK covers a related account.

Check the list before assuming the charge applies.

Does the earnings exclusion cover a distribution?

No, and this catches people out. The foreign earned income exclusion reaches salary and self-employment profit only. A retirement withdrawal is neither, so it stays fully taxable in America regardless of how long you have lived here.

The credit for British tax is the relief that helps instead.

Those are different mechanisms with different limits.

Does Britain tax the same withdrawal?

Usually yes, as pension income here. The treaty generally gives the country of residence the taxing right over periodic payments, with relief flowing the other way. That means one withdrawal, two returns and a credit claim joining them.

Our guide to Form 1116 and the foreign tax credit covers the claim.

A lump sum follows different rules again.

Does a UK pension have an equivalent?

Nothing matching it. Britain abolished its own compulsory drawdown age long ago, so a UK scheme imposes no minimum withdrawal at all. An American holding both therefore faces a rule on one side of the Atlantic and silence on the other.

Our guide to UK pensions and US tax covers the treaty position.

That asymmetry is exactly why the deadline gets missed.

What about an inherited account?

The rules are tighter and the traps are worse. Most beneficiaries must empty an inherited account within ten years, and some must still take something annually inside that window. Missing one of those annual amounts brings the same charge.

Our guide to an inherited IRA with a UK beneficiary covers it.

Beneficiaries abroad are rarely told any of this.

Does a Roth account have the same rule?

Not during the owner's lifetime. A Roth individual retirement account imposes no minimum withdrawal while you are alive, which is part of its appeal. Inherited Roth accounts are different, and they do fall inside the emptying rules.

Workplace Roth accounts have changed in recent years too.

Check the account type before assuming you are exempt.

What if the provider will not pay out?

Some refuse to send money to a foreign address or close the account instead. Opening a US account you can draw into usually solves it, though that takes time. Document the refusal, because it strengthens any waiver request considerably.

Keep the emails rather than summarising them later.

A refusal is a genuinely good reason.

What if your address is out of date?

Fix it everywhere, not just with the IRS. Providers rely on their own records, so a change filed with the tax authority never reaches them. An unopened statement sitting in an old mailbox is the commonest cause of the whole problem.

Our guide to the IRS online account from the UK covers the digital route.

Set a reminder each December regardless.

What about excess contributions?

They sit on the same form and carry 6% a year. The charge repeats annually until the excess comes out, so an old mistake can compound quietly. Removing the excess and the earnings on it before the filing date clears the charge entirely.

Contributing while abroad on excluded income is a common cause.

Excluded salary does not support a contribution.

Does it cover other savings accounts?

It does, and that surprises people. Health savings accounts and education savings accounts both appear on the form when contributions or withdrawals go wrong. The rates differ by section, but the mechanics of correcting them are much the same.

Read the part number before completing anything.

Each part has its own short set of lines.

When is the form due?

With the return for the year in question, where you are filing both together. Where that year is already filed, the form goes in by itself with the explanation attached. There is no separate extension to apply for.

Late filing does not bar a waiver request.

The IRS still considers it on its merits.

Can you file Form 5329 on its own?

Yes, and for older years that is normally how it goes. You sign it as a standalone document and post it to the address in the instructions. No amended return is needed where nothing else on that year changes.

Keep proof of posting from abroad.

International post goes astray more than people assume.

Does the IRS spot it automatically?

Not quickly, and that is a false comfort. Providers report balances and distributions, so the information exists, but matching it takes time. People often discover the problem themselves years later, by which point several charges have stacked up.

Volunteering it is far better than being found.

A self-corrected year reads completely differently.

What records should you keep?

The year end balance statements, the calculation you used, and proof of the catch-up withdrawal. Those three support the waiver if anybody asks later. Keep the explanation letter with them so the file tells the whole story.

Note the date you first noticed the shortfall.

That date decides which rate applies.

Does the provider calculate it for you?

Many do, and the figure appears on an annual statement. However, the duty sits with you rather than with them, and a provider holding a stale address will not chase. Where you hold several accounts you may also have to combine the figures yourself.

Aggregation rules differ between account types.

A workplace plan cannot usually be combined with an IRA.

Does it affect your state return?

It can, where a state still treats you as resident. Some states mirror the federal charge and some ignore it, so the same missed withdrawal costs different amounts depending on where you left. Check the state before assuming the federal fix is the whole job.

Our guide to state tax after you leave covers the residence question.

California and New York are the usual culprits.

What if the account holder has died?

The executor picks up the problem. A withdrawal the deceased should have taken in their final year still has to come out, and the charge still applies to the shortfall. Beneficiaries then start their own clock on the inherited account.

Our guide to an American executor's UK duties covers the role.

Raise it early, because probate is slow.

How to fix a missed withdrawal

1. Work out the shortfall for each year using the year end balances.
2. Withdraw the whole missed amount now, in one movement.
3. Download Form 5329 for each year involved, not the current one.
4. Enter the shortfall and put zero as the tax owed.
5. Note the waiver request on the line the instructions specify.
6. Attach a short statement saying what happened and when you acted.
7. File each Form 5329 with that year's return, or on its own.
8. Update your address with every provider before December.

Mistakes and penalties we see with Form 5329

The first is paying the charge before asking, which converts a waiver into a slow refund claim.

The second is filing one form for several years, when each year needs its own.

The third is writing a long explanation that never says what actually happened.

The fourth is fixing the paperwork without taking the money out, which leaves the shortfall alive.

How US UK Tax Accountants helps

We work out what should have come out each year, which is usually the slow part, then get the catch-up withdrawal made before anything is filed.

Then we write the waiver request in the form the instructions expect. Our pensions service covers the wider retirement position.

If you have missed a withdrawal, even several, get in touch before the next year end.

Last reviewed 20 October 2026. This article is general information and not personal tax advice, and the rates and ages described here change over time.