The title says it all. I've been working for 40 yr and never filed form 8606 even though each year I had been contributing to a traditional IRA. My contributions had all been (except for below) from my take home salary (ie already taxed). In researching retirement, I came across articles which led me to learn what I should have done. So I see that I'm missing 40 submissions of form 8606.
Complicating matters, out of 40 yr of IRA contributions, I had received a deduction on my income taxes when filing only a couple times. I'm not sure if that falls into the same category as pretaxed money from an IRA view? The remaining 38yr of contributions, I did not receive an income tax deduction since I surpassed the income threshold.
And to add to the complications, I rolled over 401k pre-tax money into my IRA. It was from a company that I had left a bunch of years prior and decided to combine 2 accounts into 1.
So as I understand, I should have identified each year's contribution as either taxed money (as in 38 of the 40 yr) or pre-taxed (as in the roll over of the 401k pretax money) (or the couple contributions where I received a reduction in my income tax by making a contribution to the IRA?).
Do I print out all 40 forms from each year and complete them and submit in one bundle?
Do I need to know info such as the value of the account at the time of each of those years?
Do I need copies of the tax form from each year?
Is there another approach?
"Do I print out all 40 forms from each year and complete them and submit in one bundle?" yes see below.
"Do I need to know info such as the value of the account at the time of each of those years?" No.
"Do I need copies of the tax form from each year?" No
You only need to file a 8606 form for each year that the Traditional IRA contribution was not deducted that year on your tax return. You cannot combine years - a separate 8608 for that tax year must be submitted but can be sent in one package. Note that there is a $50 penalty for each missed 8606 but the ITS can waive that if you attach a reasonable explanation.
You can get past years 8606 forms here - NOTE that 8606 form only go back to 1987, prior to 1987 non-deductible Traditional IRA contributions were not allowed so if not deducted then that basis is lost.
I suggest mailing certified with receipt or other tracking service.
Since only deductible contributions were permissible for tax years prior to 1987, if contributions made for years before 1987 and were not permitted to be deducted, they were excess contributions subject to a 6% penalty each year they have remained in your IRAs.
That's right - I did not think of that. That could be bad. I believe for 1986 that up to $2,250 could be contributed so if that was the amount contributed and it was not deducted then the 6% penalty that repeats every year would add up to about $4,590 by now and that is only for 1986. If other earlier years then that can be much more. Then there is also the failure to file 8606 for 34 years that is about $1,700.
If that is the case then you might want to consult with a tax professional or tax attorney that is licensed to practice before the IRS and might be able to negotiate an abatement or compromise of the penalties owed.
The individual limit for 1986 was $2,000. $2,250 was, when filing jointly, the limit for the sum of a working individual's contribution and that of the working individual's nonworking spouse to separate IRA for each.
As long as there was sufficient compensation, it's likely that the contributions made before 1986 were not excess contributions and failure to claim the deduction simply meant paying more tax than necessary for those years.