dmertz
Level 15

Retirement tax questions

You are correct, your past Roth conversions were not entirely nontaxable due to your nonzero balance in traditional IRAs at year end due to the nonzero balance in the SEP IRA, which is a type of traditional IRA.  The balance in the SEP-IRA must be included on line 6 of the Form 8606 reporting the nondeductible traditional IRA contributions and traditional IRA distributions.

 

Depending on your actual tax liability each year with an incorrectly prepared Form 8606, the statute of limitations for the IRS to make a tax assessment for the underpayment of taxes might have expired (the statute of limitations is either 3 year or, if the underreporting was substantial, 6-years).  Still, just because some of the basis should not have been applied to those conversions, that doesn't mean that you can now claim that that basis was not actually used unless those tax returns are corrected and additional taxes paid.  The principle of consistency prohibits you from treating the basis as used on one tax return and treating it as not having previously been used when preparing a later year's tax return.  Given how long it has been since the erroneous reporting on Forms 8606, it might be the case where you would just do things correctly going forward.