This is NOT Tax Advice!!! See A Licensed Financial Professional to Take Care of Your Taxes
Why Paying Taxes is Important for NIL College Athletes. The year ending 2022 should be considered the first full calendar year in which Name, Image, Likeness (“NIL”) has dominated media headlines. On3 NIL rankings suggest that just the top 100 athletes alone have annual NIL income valuations that collectively exceed seven hundred million dollars ($700,000,000).
Expanding on this premise, April 15th is Tax Day for many individuals who must pay federal, state, and local taxes on their income. All payments received falling under the NIL umbrella should be considered income.
This poses a broader question: ‘How has the college athlete prepared him or herself for the tax obligations associated with NIL income?’
While the NIL landscape is still being shaped, college athletes receiving NIL income through brand ambassadorships ought to be aware of their future tax obligations—as every individual who receives income in the United States must report to the government at the end of the tax year.
A small percentage of collegiate athletes will go on to have professional careers in their respective sports—whether that be the NBA, WNBA, NFL, NHL, MLB, or MLS. This small subset of talent may learn from the mistakes of professional athletes whose stories with tax burdens have been publicly documented.
Professional athletes are subject to the jock tax which means they are taxed in the different states they play in. The Greg Hill Show on the New England-based radio station WEEI had a segment in 2022 where they talked about the increase in the millionaire tax which would affect professional athletes. Over the years, plenty of articles have been published highlighting tax issues regarding professional athletes. Since the onset of NIL, several articles have been published addressing the issues college athletes with NIL deals may face if they don’t handle their taxes properly.
Some individuals may think that they will be able to ‘fly under the radar,’ by filing extensions or even just not reporting their income for a few years—but the tax authorities will eventually catch up before long. These individuals may encounter more fees and penalties can be aggressively compounded over time.
In extreme cases, the IRS may resort to assessing a tax lien on the individual or their businesses. Such liens can prohibit one’s ability to obtain any type of financing, such as a mortgage for a home purchase or a line of credit for a business investment. Not all tax liens are the same and the process to remove them can be arduous, as detailed in the article by the financial literacy website Finnmasters.
For collegiate athletes who receive NIL income, there are numerous methods and strategies that can be taken so that you are not confronted with an overwhelming tax bill at the end of the tax year. Electing to set up monthly, quarterly, or even semi-annual payments on their estimated tax obligations is one strategy. Setting aside a percentage of NIL-related income in a separate bank account as you earn it is another strategy. However, the jury is still out on ‘How has the college athlete prepared him or herself for the tax obligations associated with NIL income?
Balanced Bridge Funding (‘BBF’) can provide funding for those professional athletes who may have incurred unforeseen taxes from their NIL affairs during their time as collegiate athletes. BBF’s goal is to provide the most cost-efficient and practical financial solution to the professional athlete. This typically comes in the form of bank financing, but other times in the form of private advances, which they originate, underwrite, and service internally. BBF is not a broker.
For more information, email info@balancedbridge.com or call 267-457-4540.
Articles on NIL College Athletes and Tax Implications:
Clifton Larson Allen Article on Student Athletes Tax Issues from NIL Deal
