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NIL Tax Questions - Accountants Input Appreciated
Posted on 4/27/22 at 7:40 pm
Posted on 4/27/22 at 7:40 pm
With all of the money now being paid to athletes for NIL, what are the tax consequences?
Are they paid as contract labor, part time employees, etc.?
I think a lot of these kids will receive no financial advice, which could lead to big problems for them.
Are they paid as contract labor, part time employees, etc.?
I think a lot of these kids will receive no financial advice, which could lead to big problems for them.
This post was edited on 4/27/22 at 7:42 pm
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Posted on 4/27/22 at 7:54 pm to BigLSUNut
quote:
I think a lot of these kids will receive no financial advice, which could lead to big problems for them.
Not an accountant but it would be taxed as income at the appropriate tax rate. I am sure they could write off some of their expenses if any. You are right some of the kids and their families may find themselves with big problems.
Posted on 4/27/22 at 7:55 pm to BigLSUNut
Ordinary income, fully taxable when received.
Posted on 4/27/22 at 7:56 pm to BigLSUNut
I imagine the handlers get a cut and then the handlers will hire some shady/sketchy companies that will “pay the taxes” and also take a cut leaving the athletes with a lot less of the money than they should be getting
This post was edited on 4/27/22 at 7:57 pm
Posted on 4/27/22 at 8:03 pm to BigLSUNut
People will disagree, but I think NIL needs regulation for the deals to be structured through the athletic department, and the athletic department keep a couple CPAs on staff to handle the tax compliance for all athletes who have a deal. The CPAs should take the money and pull out the required taxable amount and go ahead and keep that in a holding account for the player to pay come tax season. That way the athlete doesn't get screwed over by a handler and they can just take cash payments without having to worry about paying taxes later on with money they don't have because they already spent it.
-From a CPA
-From a CPA
Posted on 4/27/22 at 8:17 pm to Bayou_Tiger_225
quote:
People will disagree, but I think NIL needs regulation for the deals to be structured through the athletic department, and the athletic department keep a couple CPAs on staff to handle the tax compliance for all athletes who have a deal. The CPAs should take the money and pull out the required taxable amount and go ahead and keep that in a holding account for the player to pay come tax season. That way the athlete doesn't get screwed over by a handler and they can just take cash payments without having to worry about paying taxes later on with money they don't have because they already spent it.
Would the CPAs be paid from the collective NIL pool? I like the idea but right now we are in a wilderness.
I know many adults doing contract work, spending every dime and have nothing for the tax man. I would hate to see this happen to the kids.
Posted on 4/27/22 at 8:26 pm to BigLSUNut
Taxes and a centralized accounting warehouse are one of the reasons collectives have boomed.
Money is pooled, distributed, and taxes deducted all under one roof.
Money is pooled, distributed, and taxes deducted all under one roof.
Posted on 4/27/22 at 8:47 pm to BigLSUNut
quote:No. In my opinion maintaining independence would be very important. The CPAs would be part of the compliance team in the athletic department. They would be a salaried employee with zero incentives related to the NIL deals.
Would the CPAs be paid from the collective NIL pool? I like the idea but right now we are in a wilderness.
Posted on 4/27/22 at 8:50 pm to BigLSUNut
I predict a lot of penalties for not paying estimated quarterly taxes.
Posted on 4/27/22 at 9:00 pm to Bayou_Tiger_225
quote:
People will disagree, but I think NIL needs regulation for the deals to be structured through the athletic department, and the athletic department keep a couple CPAs on staff to handle the tax compliance for all athletes who have a deal. The CPAs should take the money and pull out the required taxable amount and go ahead and keep that in a holding account for the player to pay come tax season. That way the athlete doesn't get screwed over by a handler and they can just take cash payments without having to worry about paying taxes later on with money they don't have because they already spent it.
-From a CPA
Many states in their NIL legislation have made financial literacy and counseling be apart of compliance.
Posted on 4/27/22 at 10:14 pm to Mingo Was His NameO
It’s gotta be a simple 1099..... It’s on the Athlete/Employee to pay it at years end. I screwed up with 1099s for years..... can’t imagine what HS kids are gonna get into. Telling them to tuck half of it away for taxes won’t sit well.....and they have absolutely no write offs
Posted on 4/27/22 at 10:54 pm to BigLSUNut
The athletes will likely be independent contractors. They will receive 1099s. Therefore, they are on their own to remit estimated taxes and file a Schedule C at the end of the year. Unless they get help from a CPA or the university, they will be very surprised at year end when they have to pay up.
Just think of the ones who get free cars, then get 1099’d for the value of the car. But, didn’t cut the deal to get enough cash to pay the taxes.
I think some where down the line the IRS is going to stick it’s nose into all this and conclude the money paid by businesses (which are deducting the payments) are in excess of the fair value of the services the athlete rendered. Accordingly, the deduction taken in excess of the FMV will be denied. And then the dominos start to fall and the payments start declining.
Just think of the ones who get free cars, then get 1099’d for the value of the car. But, didn’t cut the deal to get enough cash to pay the taxes.
I think some where down the line the IRS is going to stick it’s nose into all this and conclude the money paid by businesses (which are deducting the payments) are in excess of the fair value of the services the athlete rendered. Accordingly, the deduction taken in excess of the FMV will be denied. And then the dominos start to fall and the payments start declining.
Posted on 4/27/22 at 11:04 pm to nfcpa
Right, they have to submit the estimated withholding throughout the year. You can't just wait till the end of the year to pay unless they want to face potential penalties.
Posted on 4/27/22 at 11:21 pm to BigLSUNut
Posted on 4/27/22 at 11:26 pm to BigLSUNut
Most will either just take it in cash and be fully taxed (including full employment taxes as they’ll be independent contractors), but others will set up LLCs to get around at least a portion of the full amount of employment taxes.
Posted on 4/28/22 at 6:09 am to Bayou_Tiger_225
quote:
People will disagree, but I think NIL needs regulation for the deals to be structured through the athletic department
I doubt you could require that but as it is now athletic departments are kind of hamstrung by the NCAA's rules (vague as they are) regarding institutional involvement.
Financial literacy training is more generic so acceptable but your idea is a good one regarding at least offering the service or perhaps just contracting with or recommending properly vetted firms to offer those services to the athletes.
Posted on 4/28/22 at 7:06 am to mdomingue
You can get away with not paying estimated taxes quarterly if it's the first year you would have been expected to, provided your accountant adds an explanation to your yearly return asking for a waiver. After that you'll get penalized.
And it's always a better idea to pay taxes ASAP to keep from being short the money owed later.
And it's always a better idea to pay taxes ASAP to keep from being short the money owed later.
Posted on 4/28/22 at 7:12 am to BigLSUNut
My question is will they be subject to pay taxes in every state they play in as professional athletes are?
Posted on 4/28/22 at 7:17 am to Mingo Was His NameO
quote:
Many states in their NIL legislation have made financial literacy and counseling be apart of compliance.
And zero punishment for non compliance
Posted on 4/28/22 at 7:27 am to VABuckeye
quote:
My question is will they be subject to pay taxes in every state they play in as professional athletes are?
No, I mean I wouldn’t think so. Pro athletes get paid by the game, the game is taxed depending on the location.
NIL is an endorsement basically, so it would all depend on the location or contract language.
These taxes really aren’t that difficult. I’m sure the athletic depts have a CPA conference set up for the athletes. It really fairly simply, they just need to assume 40% taxes and either pay it to the IRS right away or escrow it.
Quarterly estimated tax penalties are fairly minor at 0.5% a month.
But I’d assume all schools will have a local CPA firm bank on these by worki my with the school/ players.
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