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Do I understand that I would have to pay a penalty (I think I read $50, but I am not sure) for any year I failed to file a 8606?

Technically, yes, the IRS specifies that you'd be responsible to file an updated form 8606 and be assessed a $50 penalty. Now, I haven't done this myself, and will defer to any other tax preparers here who have, but I've heard from my tax-prep friends that with a simple letter of explanation accompanying an updated 8606, the IRS will waive the $50 penalty. But you want to get this updated, else you'll be paying tax twice on the after tax contributed dollars...something most individuals try to avoid doing.

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