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If you inherit an IRA from your spouse, you do not need to make withdrawals from it until your age 70 1/2. When you do, you must make the required minimum withdrawal amount based on Table III in the appendix of IRS publication 590. This table is a life expectancy table that details how much money you must take from the retirement account according to your age at the time of withdrawal. All money you do take out will be taxed at ordinary income tax rates.

You must take a nonspousal withdrawal within the first year after the original account owner dies. This account withdrawal is also subject to income tax. The difference here is that you cannot defer the taxes on the inheritance like you can if you are a spouse of the original account holder.

You may avoid paying income taxes on all of the money in the account if you inherit a Roth IRA. These only allow after-tax contributions. Because of this, all of the money that is withdrawn from the account is income-tax-free. Income tax-free money paid out to the original account owner also is tax-free to heirs.

If you are required to take money from an inherited IRA, and you fail to do so, the IRS imposes significant penalties on you. The IRS imposes a 50 percent penalty on the money that should have been withdrawn but was not. This penalty persists until you take the required distribution amount. You should contact your IRA custodian to ensure that you take the proper withdrawal amount in every year you are required to take a withdrawal to avoid this penalty.