If you inherited an IRA before the rules changed in 2019, you follow different rules.
Assuming you inherited this IRA from someone who was not your spouse, you had the following options.
1. Withdraw the money immediately.
2. Withdraw the money within 5 years and close the account.
3. Withdraw the money over your expected life time by making required minimum distributions (RMDs) which is a dollar amount you must withdraw based on the size of the account and your remaining life expectancy. For example, if you were age 50 in 2021, your remaining life expectancy is 34.2 years, and you must withdraw 1/34.2, or 2.92%, of your IRA balance in 2021. You can withdraw more than the required minimum, but you will pay a penalty if you withdraw less than the required minimum.
Since it's past 5 years, you made the choice to handle this as an inherited IRA over the life expectancy rule, whether you knew about it or not.
If you did not take any distribution, the penalty is 50% of what you should have taken. Turbotax will calculate this for you. You can try and waive the penalty amount by taking your distribution as soon as possible, then including a form 5329 for the penalty and a letter of explanation requesting a waiver.
If you withdrew more than your minimum for 2021, you don't have to do anything special, just report the 1099-R in Turbotax as usual.
You can calculate your required minimum using Table 1 in appendix B of IRS publication 590-B.
https://www.irs.gov/pub/irs-pdf/p590b.pdf
If you inherited an IRA before the rules changed in 2019, you follow different rules.
Assuming you inherited this IRA from someone who was not your spouse, you had the following options.
1. Withdraw the money immediately.
2. Withdraw the money within 5 years and close the account.
3. Withdraw the money over your expected life time by making required minimum distributions (RMDs) which is a dollar amount you must withdraw based on the size of the account and your remaining life expectancy. For example, if you were age 50 in 2021, your remaining life expectancy is 34.2 years, and you must withdraw 1/34.2, or 2.92%, of your IRA balance in 2021. You can withdraw more than the required minimum, but you will pay a penalty if you withdraw less than the required minimum.
Since it's past 5 years, you made the choice to handle this as an inherited IRA over the life expectancy rule, whether you knew about it or not.
If you did not take any distribution, the penalty is 50% of what you should have taken. Turbotax will calculate this for you. You can try and waive the penalty amount by taking your distribution as soon as possible, then including a form 5329 for the penalty and a letter of explanation requesting a waiver.
If you withdrew more than your minimum for 2021, you don't have to do anything special, just report the 1099-R in Turbotax as usual.
You can calculate your required minimum using Table 1 in appendix B of IRS publication 590-B.
https://www.irs.gov/pub/irs-pdf/p590b.pdf
For IRAs where the original owner died in after 2019, the rules have been greatly simplified. If the owner was not your spouse, you must withdraw all the funds within 10 years. I actually don't know what the penalty is supposed to be, but that penalty won't be charged to anyone until at least 2030. If it uses the existing rules, it will be 50% of the amount you were supposed to withdraw.
When you inherit an IRA from someone other than your spouse, you are required to either begin taking Required Minimum Distributions (RMDs) based on your age, withdraw the entire amount or you are subject to the 5 or 10 year rules.
The ten year rule states that if you did not begin taking RMDs based on your age, you have to withdraw the entire amount of the account by December 31 of the ten year anniversary of the owner's death. This was changed to five years in 2019, but you are grandfathered in to the 10 year rule.
Since the ten year anniversary has past, you need to contact the trustee or broker of the account and have it fully distributed to you as soon as possible.
In addition, you may be subject to a 50% excise tax due to Insufficient Distributions. You can use Form 5329 to request a waiver of that amount.
If you should have withdrawn the account in 2020, you will need to amend the tax return for 2020. You would add Form 5329 and then ask for the full amount of the penalty to be waived.
Here are the specific IRS instructions for Form 5329:
"Waiver of tax for reasonable cause. The IRS can waive part or all of this tax if you can show that any shortfall in the amount of distributions was due to reasonable error and you are taking reasonable steps to remedy the shortfall. If you believe you qualify for this relief, attach a statement of explanation and file Form 5329 as follows.
The IRS will review the information you provide and decide whether to grant your request for a waiver. If your request is not granted, the IRS will notify you regarding any additional tax you may owe on the shortfall."
There was no 10 year rule in effect when this taxpayer inherited their IRA. Are you saying the 10 year rule retroactively applies to older Inherited IRAs? I did not know that.
However, even if the 10 year rule applies to older inherited IRAs, this taxpayer can still use the Life Expectancy method (see for example the 2018 version of IRS Pub 590-B, which was issued before the passage of the SECURE act.
https://www.irs.gov/pub/irs-prior/p590b--2018.pdf
The important question is what have you been doing for the past 10 years? If you have been taking withdrawals under the Life Expectancy method, you can keep doing that. The 10 year rule to close the account does not apply to you.
If you have taken no withdrawals at all, then you really need to see an accountant for help. You likely owe penalties for 2016-2019, because during those years you were supposed to be following either the Life Expectancy method or the old 5 year rule. You can't fix this problem by closing the account in 2022 and requesting a waiver of the penalty, because you have a much bigger problem than being 13 days late with a withdrawal.
There is no 10 year rule for IRAs inherited before the rule when into effect, recently.
This is good for you.
you can continue to make your RMDs based on age. ( or expected life-time which, as I'm sure you know, decreases by one each year for inherited IRAs).
In other words, you are grandfathered in to the old rules.