Our financial adviser back in 2007 placed my wife's retirement account in the wrong IRA. It was supposed to be a Roth but was made a Traditional. For a span of 6 to 7 years, we were funding that account with after-tax dollars from our checking account. Now we are going to be taxed on that money twice, going in and coming out. How can we fix that issue, or is it too late?
Hope all is well with you! When did you realize that you were making Traditional IRA contributions instead of Roth IRA contributions? In those years that you made those Traditional IRA contributions (you could look back to prior year tax returns), did you take an IRA deduction on your taxes? I ask because if you did and did not qualify, you could have turn that non-deductible IRA contribution into basis on Form 8606, which would help lower taxes when you take the distribution.
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A few years ago. I didn't take any deductions prior to that again, thinking it was a Roth IRA. Can I go back and amend tax returns from 15 years ago, or take current deductions on past events?
It is way too late to amend to take the deductions however you can amend to add the required forms 8606 (one for each tax year starting with the oldest year) to report the non deductible contribution that was made. Failure to file the needed 8606 forms will result in your paying taxes on the same money twice. Be prepared to defend yourself when the IRS penalty letter shows up for the late filed 8606 forms so you can ask for a waiver.
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