Errors in reported IRA basis in past years

[davenj]

I am taking an RMD this year, so my IRA Basis is important for the first time.   

Looking back at my tax returns and Fidelity statements for the past 20 years, I see that the reported IRA basis is incorrect in most years.  I am not sure how this happened.  The Fidelity statements are accurate, but the Turbotax-generated 8606 statements are wrong.   

I can't file amended returns for 20 years.  Should I just file my 2024 with the correct Basis and keep my fingers crossed?  What's the best strategy for avoiding a huge amount of work and/or triggering an audit flag?  Thanks. 

[Opus 17 · Accepted solution]

I don't know if you have the right idea about basis.

Your plan might track your costs; for example, your plan might show contributions of $40,000 and total current value of $100,000.  But that is not basis in a traditional IRA.  

Basis in a traditional IRA ONLY comes from making non-deductible contributions, which must be tracked and reported on form 8606.  And in fact, any basis number from your IRA custodian is worthless in this context because they don't get copies of your tax return and they don't know whether or not you took a deduction.

In other words, if you contributed $35,000 that was deductible, $5000 that was nondeductible, and the account is now worth $100,000, your basis for taxing purposes is $5000 only, not your overall contributions.

With that in mind, do your form 8606s accurately track your non-deductible basis?