Fidelity Calculates the RMD on Your Own IRA Automatically. On the IRA You Inherited From Your Mother It Calculates Nothing Unless You Ask, and 2026 Is the Second Year the IRS Is Charging the 25% Penalty
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Consider a 70-year-old retired teacher, an example composite, who logs into Fidelity this month. Her own traditional IRA looks tidy. So does the IRA she inherited from her mother. One of those two accounts is quietly running up a tax bill.
The inherited account has a required minimum distribution (RMD) for 2026, due by December 31. If she misses it, Section 4974 of the tax code imposes a 25% excise tax on the missed distribution. For heirs in her position, 2026 is only the second year the IRS has actually applied that tax.
Why Fidelity Shows One RMD and Stays Quiet on the Other
Federal reporting rules require the custodian of an IRA owner who has an RMD due to send a statement of the amount “or an offer to calculate such amount”, per IRS Notice 2023-23. That rule is why your own RMD appears on your account once you reach RMD age.
Inherited IRAs work differently. Fidelity does offer an “Inherited RMD” option, but you have to elect it on a separate automatic withdrawal form. That form says “It is your responsibility to ensure that your withdrawals comply with IRS rules and deadlines” and states that Fidelity “does not represent that you will meet your RMD requirements.” The calculation covers only that one account, and it uses your birth date only if the assets were moved into your inherited IRA by 12/31 of the year after the date of death.
Who Owes Annual Withdrawals Under the 10-Year Rule
For owners who died after December 31, 2019, the SECURE Act requires heirs to empty the account within ten years. The exceptions are a surviving spouse, the owner’s minor child, a disabled or chronically ill heir, or someone not more than ten years younger than the owner. A 70-year-old daughter of a 92-year-old mother fits none of them. If her mother died in 2025, the account must be empty by December 31, 2035.
Her mother’s death date relative to her required beginning date sets the withdrawal schedule. If the mother had already reached that date and started her own RMDs, the daughter owes annual RMDs in years one through nine and must still empty the account by year ten. If the owner died before that date, IRS Publication 590-B says no distribution is required for any year before the 10th year.
A $400,000 Inherited IRA Means a $21,277 Withdrawal by December 31
Assumptions: the mother died in 2025, years after her RMDs began. The inherited IRA held $400,000 on December 31, 2025, and the daughter turns 70 in 2026. Publication 590-B says to divide the prior year-end balance by the life expectancy in Table I, the Single Life Table.
| Line | Amount |
|---|---|
| Balance, Dec. 31, 2025 | $400,000 |
| Single Life factor, age 70 | 18.8 |
| 2026 RMD | $21,277 |
| Excise tax if skipped (25%) | $5,319 |
| Excise tax if corrected in time (10%) | $2,128 |
Next year the factor drops by one, to 17.8. Born in 1956, she doesn’t face RMDs on her own IRA until age 73, so the inherited account demands withdrawals three years earlier.
Why 2026 Is Only the Second Year This Penalty Bites
SECURE 2.0 cut the excise rate from 50% to 25% for tax years beginning after Dec. 29, 2022. Inherited-IRA heirs got even more breathing room. The IRS granted relief for certain missed RMDs in 2021, 2022, and 2023, and Notice 2024-35 extended it to 2024. That notice also said final regulations would apply starting January 1, 2025. That made 2025 the first applied year and 2026 the second.
Three Moves Before December 31 That Shrink the Penalty
- Run the number or choose the service. If your mother left IRAs at several firms, you can add up the RMDs and take the total from any of them, because the IRS allows this for more than one IRA that was owned by a single decedent. Withdrawals from your own IRA don’t count.
- Fix 2025 now. Under Section 4974(e), the rate falls to 10% if you take the missed amount from the same account and file a return reporting the tax within the correction window. That window closes at the earliest of an IRS deficiency notice, an assessment, or the last day of the second tax year after the year the tax was imposed. The tax goes on Form 5329, where you can also ask the IRS to waive it for reasonable error.
- Plan for ten years. The RMD is a minimum. Spreading withdrawals through 2035 can keep each year’s taxable income below what a single lump sum in year ten would produce.
Which tax bracket you take those withdrawals in is the kind of math worth running with a fiduciary advisor or CPA before December 31. The inherited-IRA rule is one of nine IRS traps that quietly drain six figures from retirement accounts, which we mapped out in a free report here.
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Vilma Rios is a tax professional, tax researcher, and financial writer with more than 15 years of experience in tax and accounting. Her work spans federal tax research, financial journalism, retirement planning, investment taxation, capital gains, inherited assets, and tax education. She specializes in translating complex tax and financial topics into clear, practical information that helps individuals, families, retirees, and investors make informed decisions.
She has presented tax information through webinars, including Spanish-language tax education, and has appeared on Telemundo 47 discussing tax topics and helping viewers understand important tax-filing requirements.
Her experience also includes tax and accounting work, tax research, IRS-related matters, and public tax education. While in college, Vilma volunteered in an IRS-sponsored tax assistance program and was recognized for her community service by local and state officials.
Known as "Your Tax Geek," Vilma is passionate about making taxes easier to understand and helping people navigate an increasingly complex tax system.
