IRA owners turning 70 1/2 this year must comply with required minimum withdrawal rules — or pay a costly penalty.

If you’re turning 70½ this year, get ready to start taking those mandatory annual payouts (your “required minimum distributions” or RMD’s) from your IRA accounts. Unfortunately, this is not something you can afford to put off. As SmartMoney points out in a recent article, the IRS wants you to take those distributions, and pay the additional income taxes sooner rather than later, and there are stiff penalties for non-compliance.

 In fact, if you fail to take at least the required amount each year, the IRS can assess a 50 percent penalty on the shortfall – the difference between what you should have taken and what you actually took.

SmartMoney offers a quick run-down on RMD basics, but remember this: the requirements are fairly complex, and penalties for non-compliance are pretty stiff. You are well-advised to seek qualified counsel on this one. The most important lesson here is – do not delay. If you have reached age 70-1/2 and you have IRA accounts, you have some big decisions to make now. As SmartMoney says, “If you sit on your hands, you will be in the RMD double-dip mode next year, which might result in a higher tax rate that could have been easily avoided.”

Reference:  SmartMoney (June 22, 2011) “Don’t Blow Off Minimum IRA Withdrawals”