SEP and SIMPLE IRA RMDs: Deadlines, Penalties, and Reporting

SEP and SIMPLE IRA RMD rules mirror those for traditional IRAs: once you reach age 73, you must withdraw a calculated minimum each year, report it as taxable income, and face a 25% excise tax on any shortfall. The calculation uses the prior year-end balance and an IRS life expectancy factor, and the reporting flows through Form 1099-R onto lines 4a and 4b of your Form 1040.¹

When Withdrawals Must Begin

The trigger age is 73 for anyone who reached that age after December 31, 2022. It is codified at 26 U.S.C. § 401(a)(9), and the same statute raises the age to 75 for individuals who reach age 74 after December 31, 2032.²

Your first distribution has a slightly later deadline called the Required Beginning Date: April 1 of the year after the calendar year you turn 73. Every distribution after that is due by December 31.¹

The First-Year Bunching Trap

Delaying your first RMD until April 1 is legal, but it pushes two taxable withdrawals into the same calendar year: the delayed first-year amount plus the current-year RMD, which still has a December 31 deadline. The combined income can lift you into a higher bracket, trigger Medicare premium surcharges, and reduce income-sensitive credits. Taking the first RMD during the year you actually turn 73 avoids the pileup.

No Still-Working Exception

Employer-sponsored 401(k)s let you postpone RMDs if you are still employed and own no more than 5% of the company. SEP and SIMPLE IRAs do not offer that option. Even if you continue working at the business that set up the plan, distributions must start at 73.¹

Roth Balances

SECURE 2.0 allowed employers to offer Roth contributions in SEP and SIMPLE IRAs beginning in 2023. Designated Roth amounts inside these accounts are not subject to RMDs during your lifetime.¹ Any pre-tax balance in the same plan still follows the standard rules, and beneficiaries who inherit the Roth portion do face distribution requirements later.

Calculating the Annual Amount

Take the account balance as of December 31 of the prior year and divide it by the life expectancy factor that matches your age in the IRS Uniform Lifetime Table, published in Publication 590-B.³ The divisor gets smaller each year, so the required percentage rises with age.

There is one substitution to know. If your spouse is the sole beneficiary and is more than ten years younger than you, you use the Joint and Last Survivor Table, which produces a smaller distribution.⁴ Using it when both conditions are not met counts as an under-withdrawal.

The IRS treats SEP and SIMPLE IRAs identically to traditional IRAs for this calculation, so the same tables and the same December 31 valuation date apply.

Withdrawing From Multiple IRAs

If you hold more than one traditional, SEP, or SIMPLE IRA, you must calculate the RMD separately for each account, but Treasury regulations let you add the amounts together and take the total from any one account or any combination.⁵ That flexibility is useful when you want to draw from a lagging account and let a stronger one keep compounding.

Aggregation is limited to IRAs. You cannot use an IRA withdrawal to cover a 401(k) RMD, and each employer plan requires its own separate distribution. Keep records showing the total withdrawn across all IRAs meets or exceeds the combined calculated amount.

Penalties and Fixing a Missed RMD

The excise tax for failing to take a full RMD is 25% of the shortfall.⁶ A $20,000 miss carries a $5,000 penalty on top of the ordinary income tax you still owe once the money comes out.

SECURE 2.0 added a correction window. Withdraw the missed amount and file a corrected return within the window and the penalty drops to 10%. The window runs from the date the tax is imposed until the earliest of three events: the IRS mails a notice of deficiency, the IRS assesses the tax, or the last day of the second taxable year after the year the penalty applies.⁶ That usually gives you about two years.

You can also ask the IRS to waive the penalty entirely by showing reasonable error and that you are taking steps to remedy the shortfall. File Form 5329 with a written explanation attached, enter “RC” and the shortfall amount you want waived on the dotted line next to the relevant line, and pay any remaining tax due.⁷ Custodian processing errors, serious illness, and incorrect advice from a professional are the scenarios that typically succeed.

Qualified Charitable Distributions

If you are 70½ or older, a qualified charitable distribution sends money directly from your IRA to a qualifying charity without adding to your taxable income, and it counts toward your RMD.⁸ The 2026 annual QCD limit is $111,000 per person, indexed for inflation.⁹ The transfer must go straight from the custodian to the charity; if a check passes through your hands or lands in a donor-advised fund, it does not qualify.

There is a catch specific to SEP and SIMPLE IRA owners. The statute excludes plans described in 26 U.S.C. § 408(k) and (p) — SEPs and SIMPLEs — from QCD eligibility.⁸ In practice, the IRS treats an inactive SEP or SIMPLE IRA, one that received no employer contributions for the plan year, as a regular traditional IRA that can support a QCD. If contributions are still flowing in, that account is off limits for QCDs.

On Form 1040, enter the full distribution on line 4a. If the entire distribution was a QCD, enter zero on line 4b and check the box on line 4c. If only part was a QCD, line 4b shows the taxable remainder.¹⁰ You cannot also claim a charitable deduction for the QCD amount.

Inherited SEP and SIMPLE IRAs

If you inherit one of these accounts, the distribution rules turn on your relationship to the original owner and whether that person had already begun RMDs.

Eligible designated beneficiaries can stretch distributions over their own life expectancy rather than draining the account within ten years. That group includes surviving spouses, minor children of the account owner (not grandchildren), disabled or chronically ill individuals, and beneficiaries who are not more than ten years younger than the original owner. They may take distributions over the longer of their own life expectancy or the deceased owner’s remaining life expectancy.¹¹

Everyone else falls under the ten-year rule. If the original owner died on or after the required beginning date, the beneficiary must take annual distributions in years one through nine and empty the account by the end of year ten. If the owner died before the required beginning date, no annual minimums apply during the ten years; the account simply has to be fully distributed by the end of year ten.¹²

Reporting the Distribution

Two forms drive the reporting.

Form 1099-R

Your custodian issues Form 1099-R by January 31 for the prior year’s distributions.¹³ Box 1 shows the gross distribution, Box 2a shows the taxable amount (usually identical to Box 1 for SEP and SIMPLE IRAs because contributions were pre-tax), and Box 7 carries the distribution code. Code 7 signals a normal distribution taken at age 59½ or older, with no early withdrawal penalty.¹⁴

Form 5498

Form 5498 reports the fair market value of the IRA on December 31, the figure you use for next year’s RMD calculation.¹⁵ Custodians have until May 31 to send it because it also captures contributions made through the filing deadline, so you often will not have it in hand when you file. Most custodians post the year-end balance online well before then.

Form 8606 for Basis

If any part of your IRA balance came from after-tax contributions, a slice of each distribution is a tax-free return of basis. Form 8606 tracks that basis for traditional, SEP, and SIMPLE IRAs alike.¹⁶ Employer contributions to SEP and SIMPLE plans are always pre-tax, so most participants have no basis to track. The exception is when you have rolled funds from a traditional IRA that held after-tax money.

Lines 4a and 4b

IRA distributions land on Form 1040, line 4a for the gross amount and line 4b for the taxable portion.¹⁰ For most SEP and SIMPLE withdrawals the two numbers match. A QCD or non-deductible basis will make line 4b smaller than line 4a. Lines 5a and 5b are for pensions and annuities from employer plans, not for IRAs.

Withholding and Estimated Payments

IRA distributions are treated as nonperiodic payments with a default federal withholding rate of 10% of the taxable amount. Your custodian applies that rate automatically unless you file Form W-4R to change it or opt out.¹⁷ Ten percent is often too low for retirees in the 22% or 24% bracket, leaving a balance due at filing.

You can raise withholding on the distribution itself through Form W-4R or make quarterly estimated payments using Form 1040-ES. Total withholding and estimated payments generally need to reach the lesser of 90% of your current-year tax or 100% of last year’s tax, and that second figure rises to 110% if your prior-year AGI exceeded $150,000.¹⁸ Any remaining balance is due April 15; a filing extension does not extend the payment deadline.¹⁹

1
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
2
Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans
3
Internal Revenue Service. Publication 590-B – Distributions From Individual Retirement Arrangements (IRAs)
4
Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
5
eCFR. 26 CFR 1.408-8 – Distribution Requirements for Individual Retirement Accounts
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Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans
7
Internal Revenue Service. Instructions for Form 5329
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Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
9
Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs
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Internal Revenue Service. Instructions for Form 1040 (2025)
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12
Internal Revenue Service. Required Minimum Distributions for IRA Beneficiaries
13
Internal Revenue Service. About Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
14
Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498
15
Internal Revenue Service. Form 5498 – IRA Contribution Information
16
Internal Revenue Service. About Form 8606, Nondeductible IRAs
17
Internal Revenue Service. About Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions
18
Internal Revenue Service. Estimated Tax for Individuals (Form 1040-ES)
19
Internal Revenue Service. When to File