§4974 — Title 26 Internal Revenue Code | U.S. Code

Summary

If you get less money from a retirement plan during the year than the law says you must take out, you must pay a tax equal to 25% of the missing amount. The person who was supposed to get the money has to pay that tax. The "minimum required distribution" means the yearly withdrawal amount set by the tax rules for required withdrawals. The rule covers five kinds of plans: employer plans with a tax-exempt trust (401(a)), certain annuity plans and contracts (403(a) and 403(b)), individual retirement accounts (408(a)), and individual retirement annuities (408(b)). You can tell the IRS that the shortfall happened because of a reasonable mistake and that you are fixing it. There is a "correction window" — from when the tax is first charged until the IRS sends a deficiency notice, the tax is assessed, or the end of the second taxable year after the year the tax was charged, whichever comes first. If you get the missed amount back from the same plan and file a return during that window showing the adjusted tax, the tax treatment is changed under these rules.

Title 26, §4974

Internal Revenue Code — Source: USLM XML via OLRC

(a)If the amount distributed during the taxable year of the payee under any qualified retirement plan or any eligible deferred compensation plan (as defined in section 457(b)) is less than the minimum required distribution for such taxable year, there is hereby imposed a tax equal to 25 percent of the amount by which such minimum required distribution exceeds the actual amount distributed during the taxable year. The tax imposed by this section shall be paid by the payee.

(b)For purposes of this section, the term “minimum required distribution” means the minimum amount required to be distributed during a taxable year under section 401(a)(9), 403(b)(10), 408(a)(6), 408(b)(3), or 457(d)(2), as the case may be, as determined under regulations prescribed by the Secretary.

(c)For purposes of this section, the term “qualified retirement plan” means—

(1)a plan described in section 401(a) which includes a trust exempt from tax under section 501(a),

(2)an annuity plan described in section 403(a),

(3)an annuity contract described in section 403(b),

(4)an individual retirement account described in section 408(a), or

(5)an individual retirement annuity described in section 408(b).

(d)If the taxpayer establishes to the satisfaction of the Secretary that—

(1)the shortfall described in subsection (a) in the amount distributed during any taxable year was due to reasonable error, and

(2)reasonable steps are being taken to remedy the shortfall,

(e)(1)In the case of a taxpayer who—

(A)receives a distribution, during the correction window, of the amount which resulted in imposition of a tax under subsection (a) from the same plan to which such tax relates, and

(B)submits a return, during the correction window, reflecting such tax (as modified by this subsection),

(2)For purposes of this subsection, the term “correction window” means the period of time beginning on the date on which the tax under subsection (a) is imposed with respect to a shortfall of distributions from a plan described in subsection (a), and ending on the earliest of—

(A)the date of mailing a notice of deficiency with respect to the tax imposed by subsection (a) under section 6212,

(B)the date on which the tax imposed by subsection (a) is assessed, or

(C)the last day of the second taxable year that begins after the end of the taxable year in which the tax under subsection (a) is imposed.

Notes & Related Subsidiaries

Editorial Notes

Amendments

2022—Subsec. (a). Pub. L. 117–328, § 302(a), substituted “25 percent” for “50 percent”. Subsec. (e). Pub. L. 117–328, § 302(b), added subsec. (e). 1986—Pub. L. 99–514, § 1121(a)(1), amended section generally, substituting provisions imposing an excise tax on certain accumulations in qualified retirement plans for provisions imposing an excise tax on certain accumulations in individual retirement accounts and annuities. Subsec. (a). Pub. L. 99–514, § 1852(a)(7)(B), substituted “section 408(a)(6) or 408(b)(3)” for “section 408(a)(6) or (7), or 408(b)(3) or (4)”. Subsec. (b). Pub. L. 99–514, § 1852(a)(7)(C), substituted “section 408(a)(6) or 408(b)(3)” for “section 408(a)(6) or (7) or 408(b)(3) or (4)”. 1978—Subsec. (c). Pub. L. 95–600 added subsec. (c). 1976—Subsec. (b). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.

Statutory Notes and Related Subsidiaries

Effective Date

of 2022 Amendment Pub. L. 117–328, div. T, title III, § 302(c), Dec. 29, 2022, 136 Stat. 5339, provided that: “The

Amendments

made by this section [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Dec. 29, 2022].”

Effective Date

of 1986 AmendmentAmendment by section 1121(a)(1) of Pub. L. 99–514 applicable to years beginning after Dec. 31, 1988, with special provisions for plans maintained pursuant to collective bargaining agreements ratified before Mar. 1, 1986, and transition rules, see section 1121(d) of Pub. L. 99–514, set out as a note under section 401 of this title. Amendment by section 1852(a)(7)(B), (C) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.

Effective Date

of 1978 Amendment Pub. L. 95–600, title I, § 157(i)(2), Nov. 6, 1978, 92 Stat. 2809, provided that: “The amendment made by paragraph (1) [amending this section] shall apply to taxable years beginning after December 31, 1975.”

Effective Date

Section effective Jan. 1, 1975, see section 2002(i)(2) of Pub. L. 93–406, set out as an

Effective Date

note under section 4973 of this title. Plan

Amendments

Not Required Until January 1, 1989For provisions directing that if any

Amendments

made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.

§4974 Excise Tax on Certain Accumulations in Qualified Retirement Plans

Summary

Title 26, §4974

Notes & Related Subsidiaries

Editorial Notes

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Amendments

Effective Date

Effective Date

Effective Date

Effective Date

Amendments

Amendments

Citations & Metadata