A family member recently passed away and their IRA account was closed. I was given a portion of this as inheritance. Do I need to make a tax pre-payment on that amount?

[Bsch4477]

No, but you will pay income tax at your marginal tax rate when you withdraw from it. You must withdraw the balance within 10 years. 

[rjs]

What precisely did you receive? Were you given an IRA account, or was the money taken out of the decedent's IRA and given to you as cash?

Was the decedent's IRA a traditional IRA or a Roth IRA?

Was the family member who passed away your spouse?

[slnb56]

Hello,

The money was taken out of the IRA and given as cash. It was a traditional IRA. The family member was my grandmother. I was told that it’ll be taxed as regular income, then was told I need to make pre-tax payments otherwise there will be a penalty. I’m not sure which is correct. I appreciate your time!

[dmertz]

"I was told that it’ll be taxed as regular income, then was told I need to make pre-tax payments otherwise there will be a penalty."  Both statements can be correct.  If the taxable amount is large enough and you do not have enough withholding and estimated tax payments to avoid an underpayment penalty, you'll owe a penalty:

https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty

[slnb56]

Do you know the proper way to make a pre-payment through Turbo Tax? So far I’m unable to find where I can enter any information for 2023 income. 

[Bsch4477]

You don’t make tax withholding through TurboTax. Use the form below or you can establish an amount with the IRS to make payment directly. 

https://www.irs.gov/pub/irs-pdf/f1040es.pdf

[rjs]

@slnb56  The prepayment is called estimated tax, not withholding. You can make an estimated tax payment online directly from your bank account using Direct Pay on the IRS web site. Select "Estimated Tax" and select 2023 as the year.

[rjs]

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@slnb56 wrote:

I was told that it’ll be taxed as regular income, then was told I need to make pre-tax payments . . .

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@slnb56  "Was told" by whom? The executor of your grandmother's estate? The IRA custodian? Someone else?

[rjs]

@dmertz  Is it possible the the estate paid the income tax on the money that was taken out of the IRA before it was distributed to the beneficiaries, or will pay the tax when a 1041 is filed?

[dmertz]

Even if the IRA was paid to the estate due to having no designated beneficiary, the estate would normally pass the income through to the estate beneficiaries for taxation on the beneficiaries' tax returns, so the result would be the essentially the same.  If a beneficiary is told that it will be taxable on the beneficiary's tax return, there's no reason to expect otherwise and it's prudent for the beneficiary to determine if an estimated tax payment is needed to avoid an underpayment penalty due to the increase in taxable income.