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I am under the impression that there is no (U.S.) federal income tax. See, for example, the beginning of the second paragraph under Understanding Inheritance Taxes in https://www.investopedia.com/terms/i/inheritancetax.asp

If that is true, then why are beneficiaries being required to fill out a W-9 form before the executor sends will send an inheritance check? Is this standard practice in the U.S.?

Someone I know has been required to do this even though the amount of the distribution is not extraordinarily large---somewhere between $20,000 and $25,000?

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  • W-9 has nothing to do with whether the income is taxable. It's about checking whether the payee would be subject to backup withholding, which is basically a process whereby the IRS can take a cut of some payment to you, even though the payment itself is not taxable, and credit it against whatever tax liability you otherwise have. It's used in cases where they're concerned you won't otherwise pay what you owe. That said, I do not know whether inheritances are supposed to be subject to backup withholding.
    – Nate Eldredge
    Jan 11, 2022 at 2:15
  • I also know of some organizations which demand W-9 from all payees, even when the IRS would not require it, basically for internal record-keeping.
    – Nate Eldredge
    Jan 11, 2022 at 2:16
  • @Nate Eldredge Thank you for your comments. Perhaps it is for internal record-keeping as you say, for the distribution is to be in cash, and not an income-producing asset. Though I do not know why the executor (lawyer, in this case) would need a beneficiary's SSN for his records. Thanks again.
    – user35941
    Jan 11, 2022 at 2:20
  • "I do not know why the executor (lawyer, in this case) would need a beneficiary's SSN for his records": the SSN is required for backup withholding, so that the resulting payment to the IRS can be credited to the correct taxpayer. If the payee is not subject to backup withholding (and most are not) then the SSN helps establish that the payee was identified correctly as a payee who is not subject to backup withholding.
    – phoog
    Jan 11, 2022 at 2:33

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The tax in question that is a concern is probably not an estate tax due in connection with an inheritance tax, it is probably the federal income tax that applies to the beneficiary in some way.

Typically, if there is a specific devise (e.g. I hereby leave you my nephew $10,000) that is distributed more than one year after the date of death, part of the inheritance is taxable interest income to the recipient.

Another circumstance in which an inheritance could generate reportable taxable income is if the inheritance is of "income in respect of a decedent" (e.g. retirement account distributions, or a final paycheck).

More generally, if the estate had taxable income in excess of $100 as determined in IRS Form 1041 (e.g. due to the sale of capital assets that have appreciated after the date of death, rental income, dividends, or interest received), this estate income is allocated to the beneficiaries of the estate receiving distributions and flows through to them as a result of the "distributable net income deduction" of the estate, and has to be reported on Schedule K-1 from the estate with the beneficiary's Social Security numbers.

So, there are multiple reasons why a W-9 might be required in connection with an inheritance.

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  • Thank you for this excellent answer. The deceased passed away almost two years ago. The estate is liquidated except for a delayed refund from the IRS. Thus, the estate must be earning (taxable) interest in a bank somewhere. Should the beneficiaries expect to receive a form (1099 or something similar) indicating the amount of taxable interest each is to declare on their 2022 returns? Many thanks again for your answer.
    – user35941
    Jan 11, 2022 at 12:06
  • @SamuelBowditch Probably a K-1.
    – ohwilleke
    Jan 11, 2022 at 20:16

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