• If you're age 73 or older and retired, the annual deadline for required minimum distributions is approaching, according to the IRS.
• Generally, you must start RMDs by age 73. The first due date is April 1 after turning 73, and you must take future RMDs by Dec. 31.
• Skipping an RMD or not taking the full amount by the deadline will trigger a 25% penalty.

If you're age 73 or older and retired, there's a key annual deadline approaching for — and missing it could , the IRS said on Tuesday.

Generally, you must start so-called by age 73. The after turning 73, and you must take future RMDs by Dec. 31 each year, according to the agency.

The original account owner and generally must take yearly RMDs for tax-deferred accounts, such as 401(k) plans, individual retirement accounts and other plans. Some heirs also must take RMDs for inherited Roth IRAs.

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Large balances can cause a 'tax nightmare'

For some investors, bigger pretax accounts can be "a tax nightmare in retirement" when it's time for RMDs, certified financial planner Derek Williams with Veratis Advisors in Cary, North Carolina .

Pretax RMDs boost your adjusted gross income, which can cause higher and Part D premiums, among other tax consequences, he said.

Your RMD is based on your pre-tax retirement balance as of Dec. 31 from the previous year. That means your 2024 RMD uses year-end figures from 2023.

For 2024, the calculation divides your 2023 pretax balance by an IRS .  

If you skip an RMD or don't take the full amount by the deadline, you can expect a 25% excise tax on the amount not withdrawn. The penalty if the RMD is "timely corrected within two years," according to the IRS.

The agency could if the shortfall was due to "reasonable error" and you take "reasonable steps" to correct it. But you must file with a letter of explanation.

Reduce taxes with charitable transfer

If you need to take an RMD and also want to plan a year-end , it's possible to accomplish both with a , or QCD, experts say.

QCDs are transfers from an individual retirement account to a , which "counts against your RMD but doesn't get added to your taxable income," according to CFP Michael Lofley with HBKS Wealth Advisors in Stuart, Florida.

Plus, you can use the strategy to score a tax break for charitable gifts, even if you don't itemize deductions on your tax return, said Lofley, who is also a certified public accountant.

There's been a higher standard deduction since 2018, and only about 10% of taxpayers  on 2021 returns, according to the most recent IRS filing data.