Pro Athletes Navigate Complicated Tax Rules
If you live in one state and work in another, you have to let the IRS know about it when tax time arrives.
If you work in more than one state, that’s also something you need to tell the IRS. And for professional athletes, competing on the road makes figuring out income taxes very complicated.
“Take, [for] example, a professional baseball player. How many cities does that baseball player play in? They will owe a tax return, sometimes, in ten to 15 states. So, it can be a little bit onerous. For a first-time professional athlete, when they first get their check, it’s great, and then they realize, ‘I have to pay tax everywhere,'” says tax attorney and Certified Public Accountant Rich Hofmann.
Hofmann says professional athletes need to track where they are when they’re working. But, he says, for most pro athletes who work for an organization, the organization will do the tracking.
Hofmann also says how an athlete’s contract is structured could affect where their income tax is paid. “They might be able to structure some of their compensation as deferred compensation. There may be some things they can do in terms of signing bonuses and residency when that bonus is realized. So, there’s some really cool things you can do, but, again, it really depends on the player and the facts and circumstances.”
Hofmann says pro athletes should get an agent who knows what’s going on and has access to tax expertise.
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