The requirements are that some minimum amount be distributed from the IRA for a particular year. There is no restriction on the maximum amount (up to the entire balance) that can be distributed from the IRA.
Under the 5-year rule, entire balance is required to be distributed by the end of the fifth year following the year of death of the decedent. If you make the distribution of the entire balance after that, a late distribution, Form 5329 needs to be filed to request a waiver based on taking the necessary action to correct the distribution shortfall. You would file a single Form 5329 for the year that is the fifth year following the year of death since that's the year that the minimum amount required to be distributed, the entire balance, was not timely distributed.
You include distributions as income on the tax return for the year in which you actually received the distribution, not as income on the tax return for the year in which the distribution was supposed to have been taken. The only thing that you would potentially owe with the tax return for the year in which the distribution was missed is the 50% excess-accumulation penalty (an excise tax, not an income tax), but the IRS nearly always grants the waiver of that penalty for reasonable cause (and my guess is that the IRS considers reasonable just about any reason other than, "I did it intentionally").
