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Most retirement tax mistakes aren't complicated once someone points them out. That's what makes them expensive. Nobody sends a warning before the deadline passes, so the first sign is usually a penalty notice or a bigger balance due than you expected months later.
Three mistakes account for most of the damage: missing or shorting a required withdrawal, not withholding enough from retirement income, and assuming your old state's tax rules still apply after a move. None of them take long to fix once you know to check.
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Which one applies to you right now?
Pick the one closest to your situation so the rest of this fits.
Focus on the RMD section first. The penalty for getting this wrong is steep and avoidable.
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The Required Withdrawal Mistake
Once you turn 73, most retirement accounts require you to withdraw a minimum amount every year, and the IRS calculates that amount off your account balance and your age, not off what feels convenient. Missing the deadline, or taking less than the required amount, triggers an excise tax on the shortfall. That tax used to run 50 percent of the amount you should have withdrawn; current rules lowered it, but it's still a real penalty for a mistake that's simple to avoid once you know the deadline.
The most common version of this mistake isn't forgetting entirely. It's calculating the withdrawal off the wrong account balance, or forgetting an inherited account that has its own separate requirement.
ChecklistConfirm your required withdrawal before December 31Do this for every account that requires one, not just your largest.Show the checklistHide the checklist
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If turning 73 this year is new to you, Required Minimum Distribution: Your Turning-73 Checklist walks through the deadline and the calculation in more detail.
The Withholding Gap That Creates a Penalty
Retirement income doesn't automatically withhold tax the way a paycheck did. Social Security, pensions, and account withdrawals each have their own withholding rules, and it's easy to end up with too little withheld across all of them combined even though each one looks fine on its own.
The IRS doesn't wait until filing season to notice. If you underpay by enough during the year, you owe an underpayment penalty on top of the tax itself, calculated separately from your regular bill.
Quick calculator
Check your rough withholding gap
Compare what you expect to owe against what's actually being withheld across your income sources.
Withholding and payments so far: $3,900
Rough amount left to cover: $2,100 • Essentials use 65% of income.
If this number is positive and it's late in the year, ask a preparer about an estimated payment before December 31, not after.
ChecklistClose the gap before year endAny of these can fix a shortfall without waiting for next year.Show the checklistHide the checklist
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The State Residency Mistake
Moving in retirement, or splitting the year between two homes, changes more than your mailing address. States decide who owes tax based on residency and domicile rules that don't always match where you spend the most time or where you registered to vote. Retirees who assume their old state stopped taxing them the day they moved sometimes find out otherwise at filing season.
ChecklistEstablish your residency on paper, not just in practiceDocumentation is what actually changes your tax home in most states.Show the checklistHide the checklist
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Get Free Help Before You File
You don't have to sort any of this out alone. The IRS's Tax Counseling for the Elderly program, mostly run through AARP Foundation Tax-Aide sites, offers free help to people 60 and older, and volunteers are trained on exactly these situations: required withdrawals, withholding, and multi-state questions.
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Name where you'll get help
Naming it now makes it easier to actually book the appointment.
If you're filing without a spouse for the first time, Aging Alone Changes Your Tax Picture: What Filing Single in Retirement Actually Means covers what shifts in your bracket and deductions.
TimelineWork it before the deadlines stack upCheck each step off as you finish it.Show the timelineHide the timeline
Run the I'm not sure I'm taking the right required withdrawal amount checks above against your actual accounts and address.
Both of these have year-end deadlines. Waiting until filing season is too late to fix either one.
Hand over what you confirmed here so the appointment starts from your numbers, not a guess.
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Save what you confirmed here so it's ready before a deadline or your filing appointment.
Common questions
What happens if I miss my required minimum distribution?
Missing an RMD or taking less than the required amount triggers an excise tax on the shortfall. Current rules lowered that penalty from the old 50 percent rate, but it's still a real cost for a mistake that's simple to avoid. Confirm every retirement account that requires a withdrawal this year, including any you inherited, and make sure the withdrawal actually posts before December 31.
Why do retirees end up with an underpayment penalty even if they think they paid enough tax?
Social Security, pensions, and retirement account withdrawals each have separate withholding rules, and it's easy for the combined total to fall short even when each source looks fine on its own. If you underpay by enough during the year, the IRS charges an underpayment penalty on top of the tax itself. Adjusting withholding with Form W-4V or W-4P, or making a fourth-quarter estimated payment, can close the gap before it becomes a penalty.
Does moving to a new state automatically stop my old state from taxing me?
No. States decide residency using their own rules, and those don't always match where you spend the most time. Update your driver's license, voter registration, and the address on file with Social Security and your financial accounts, keep a log of days spent in each state if you split time, and ask your old state directly what proof it requires to stop treating you as a resident.
Where can retirees get free help with these tax questions?
The IRS's Tax Counseling for the Elderly program, mostly run through AARP Foundation Tax-Aide sites, offers free help to people 60 and older. Volunteers are trained on required withdrawals, withholding, and multi-state residency questions, so bring your account statements and this article's checklist to the appointment.
