The most common mistake I see with backdoor Roth conversions is unintentionally running afoul of the IRA aggregation rule, but to me, the true biggest backdoor Roth IRA conversion mistake is improper tax reporting.
"People who exercise ISO grants don't usually pay federal tax upon exercise." I've met enough people stuck with tens of thousands or even hundreds of thousands of dollars of unexpected taxes from ISO exercises to know this is a common and potentially devastating misconception.
If you have equity in a startup that shut down, you can claim it as a loss on your taxes. But, it's not as simple as just writing them off as a total loss when you find out about it – the IRS wants you to claim the loss in the year the stock became worthless.
Health Savings Accounts, or HSAs, are tax-advantaged accounts designed to encourage saving and preparing for future medical expenses. They encourage people who are paying lower health insurance premiums by being covered by an HDHP to direct some of the money they otherwise would have used on a more expensive plan's premiums to future expenses.
Nondeductible IRA contributions are similar to a Roth IRA in the sense that contributions are made after tax in both cases. The huge and extremely important difference is that the earnings on nondeductible contributions to a Traditional IRA are fully taxable at distribution, while the earnings on Roth IRA contributions are tax-free.
The minimum tax credit, or MTC, is a non-refundable tax credit created when AMT is paid on deferral items. In tax years after AMT is owed, the MTC is recovered by reducing the taxes you otherwise would owe. It could take just one year to recover your MTC, but it often takes several years, even decades.
