NIL Taxes (Paid like a pro, taxed like a pro)

[Bobcat4Ever]

Here’s a very interesting article about the NIL status of independent contractors, and their duty (privilege) to pay Federal and State taxes. Most recipients fall below the income cutoff — but not all! And don’t forget to pay taxes on all that Bowl Game swag and gifts from your school and booster. Welcome to the world at large.

https://www.sportico.com/business/fina ... 234822148/

[Cledus]

The school / sponsor probably arranges to have taxes prepared and filed for the NIL recipient. And the value of those services are probably included in the NIL number. All the recipient pretty much has to do is sign the return. I once won a diamond encrusted gold watch relating to an achievement at work, and its value was included on my next pay stub as a separate line item, and my withholdings were adjusted up to correspond to watch's value.

Also, the article is wrong on the income cutoff of $14,600. That's only correct for income tax, but NIL recipients are contractors and they have to pay self-employment tax on their net. Again, probably taken care of without the recipient having to do anything.

But still eye opening when you're not accustomed to any of it. I promise the schools aren't hanging the athletes out to dry. This article is typical of writers opining on something they have no idea what they're talking about.

[DMMDCats]

I think the author has a handle of it all.

I believe the collective did some class work with the players on taxes.
I won’t speak for Brandon, but I know it was discussed.

They are 1099 employees,
Not W2 like Cledus.

No one does it for you.
You do the work, get your own agent, attorney and accountant.

A smart person shouldn’t trust the schools or boosters to be looking out for their best interests. They should know better.
Trust but verify, with your own people who are accountable to you, not the school nor the boosters.


I believe the point of NIL lawsuits was that the schools were not looking out for their athletes best interests. The schools were looking for the money. And the schools didn’t want to share.

[Cledus]

I think the author has a handle of it all.

Doing a google search does not give someone a "handle" on a complex topic. As I mentioned, the $14,600 exclusion is for income tax, not self-employment tax. You proved my claim.

They are 1099 employees,
Not W2 like Cledus.

Yes, I know. I used the word contractor as do most industry professionals. And there is no such thing as a "1099 employee." Employees are not issued 1099's. 1099 is the form used to report compensation for non-employees. Again, you proved my claim.

If a player is issued a 1099 for $10,000, that $10,000 is subject to the self-employment tax. Self-employment tax is a separate topic from income tax, and is calculated separately. It is not a linear process. It can get confusing to non-professionals because it's all eventually reported on the individual's 1040.

When I said the school probably does it for you, I was using deductive reasoning based on how I know a lot of companies hire tax firms for their executives. Yes, it's still incumbent upon the individual to furnish the tax firm/accountant the tax documents but it's generally turn key. The schools would face a PR nightmare if they didn't step in and assist the players with this stuff to some degree.

I have an education in this subject, credentials, and I do between 200 and 300 returns per year. Take your L and move on.

[Cledus]

@DMMDCats I popped in $10,000 into a dummy return in my software for someone who received a 1099 just so you can see how the numbers flow through. It's not a full return, just the relevant pages, which is just six. You'll see there's zero in income tax, and $1,477 in self-employment tax. Everything as I said would be.

Dummy tax return

[DMMDCats]

I am self employed
25+ yrs

I think I understand it. But the root of all knowledge is knowing we know nothing.

That is why you get an agent, accountant and attorney accountable to the “contractor”.

I used the term employee as that is how the courts recently described them.

I am happy for your big W.
Woo hoo, ya, you got me good. I am soooooo embarrassed.

Now prove the school does it the way you described. No assumptions just because that’s how corporate America does it.

I see enough tax returns, no need to peruse your need for attention.

But, seeing how you are the expert, maybe you could do a free master class for the players in how NIL taxes work. I am sure they would appreciate it. You could even get some new clients. Serious dude. No trolling.


I believe you overreacted and I believe you will overreact to this reply.

Thanks, have a nice day

Go CATS!

Curious, what is the tax liability you calculate on $17,600, $23,500, $62,500 taxable income?
Checking my numbers.

Thanks

[onceacat]

The school / sponsor probably arranges to have taxes prepared and filed for the NIL recipient. And the value of those services are probably included in the NIL number. All the recipient pretty much has to do is sign the return. I once won a diamond encrusted gold watch relating to an achievement at work, and its value was included on my next pay stub as a separate line item, and my withholdings were adjusted up to correspond to watch's value.

Also, the article is wrong on the income cutoff of $14,600. That's only correct for income tax, but NIL recipients are contractors and they have to pay self-employment tax on their net. Again, probably taken care of without the recipient having to do anything.

But still eye opening when you're not accustomed to any of it. I promise the schools aren't hanging the athletes out to dry. This article is typical of writers opining on something they have no idea what they're talking about.

I'd be shocked if anyone other than the top 5% of NIL recipients are taken care of that way. I know with 100% certainty that the guys currently on the Bobcats who are getting NIL deals are not having self-employment taxes withheld.

I promise you that since the schools are required to maintain a firewall with the NIL collectives that 100% the schools are hanging kinds out to dry. Thats how the business works.

I doubt anyone at the IRS is coming after G5 athletes for exceeding the gift limits for getting $1500 worth of swag...but if you think the NIL collectives are doing anything at all in the interest of the athletes, you haven't been paying attention.

(The watch you received was from you employer, so of course they would report it on your W2 paystubs. Anyone doing an NIL deal is a 1099 subcontractor & 1099s aren't even sent to the IRS, so these guys are 100% out there at the mercy of the tax laws which most of them probably don't understand.)

Posters on social media are typical of writers opining on something they have no idea what they're talking about.

[onceacat]

I think the author has a handle of it all.

Doing a google search does not give someone a "handle" on a complex topic. As I mentioned, the $14,600 exclusion is for income tax, not self-employment tax. You proved my claim.

They are 1099 employees,
Not W2 like Cledus.

Yes, I know. I used the word contractor as do most industry professionals. And there is no such thing as a "1099 employee." Employees are not issued 1099's. 1099 is the form used to report compensation for non-employees. Again, you proved my claim.

If a player is issued a 1099 for $10,000, that $10,000 is subject to the self-employment tax. Self-employment tax is a separate topic from income tax, and is calculated separately. It is not a linear process. It can get confusing to non-professionals because it's all eventually reported on the individual's 1040.

When I said the school probably does it for you, I was using deductive reasoning based on how I know a lot of companies hire tax firms for their executives. Yes, it's still incumbent upon the individual to furnish the tax firm/accountant the tax documents but it's generally turn key. The schools would face a PR nightmare if they didn't step in and assist the players with this stuff to some degree.

I have an education in this subject, credentials, and I do between 200 and 300 returns per year. Take your L and move on.

1099 'employees' are considered a normal work relationship, even though its technically an oxymoron. Every single tax professional knows this.

Schools also face PR problems when NIL groups offer money that never comes through. This is pretty well documented at this point.

Self employment tax is subject to a less rigorous process than income tax for 1099s. You get to do things like claim expenses, qualified business deductions, and a whole host of tax write offs.

Its not subject to the same tax rates as a $10,000 watch from your employer.

Stop giving people bad advice.

[onceacat]

I am self employed
25+ yrs

I think I understand it. But the root of all knowledge is knowing we know nothing.

That is why you get an agent, accountant and attorney accountable to the “contractor”.

I used the term employee as that is how the courts recently described them.

I am happy for your big W.
Woo hoo, ya, you got me good. I am soooooo embarrassed.

Now prove the school does it the way you described. No assumptions just because that’s how corporate America does it.

I see enough tax returns, no need to peruse your need for attention.

But, seeing how you are the expert, maybe you could do a free master class for the players in how NIL taxes work. I am sure they would appreciate it. You could even get some new clients. Serious dude. No trolling.


I believe you overreacted and I believe you will overreact to this reply.

Thanks, have a nice day

Go CATS!

Curious, what is the tax liability you calculate on $17,600, $23,500, $62,500 taxable income?
Checking my numbers.

Thanks

Good post. Theres probably a good living to be made in offering coaching and/or financial advice to 20 year old young guys who've probably never filed a tax return or had to deal with financial planning who suddenly come into $10k or $50k or $100k in windfall cash.

Probably not an issue for the Mannings & Sanders of the world, for for a dude like Scottre of Rohan, it could be a really big deal.