This is a common thought in today’s world; However, if you take a peak under the surface you will find out that along with the fame and fortune that comes with being a top level professional athlete also comes a lot of new issues and major concerns that should be addressed for the financial well-being of the athlete and his family.
In this article I will touch on some tax issues that are very important to address.
As a new professional athlete you go through a process of training, the draft, off-season workouts, training camp then if you make the team you will finally see time on the court/field then start collecting your paychecks. Most people do not know that professional athletes generally get their paycheck only during the weeks that the season is ongoing. During the offseason they do not generally receive a paycheck so they must budget for their financial commitments and obligations during those periods with the money they receive during the season (for this article I am not considering off the field/court income such as endorsements or appearances).
At the end of the calendar year, like the rest of us, professional athletes must gather all of their financial documents together in order to file their federal income tax returns with the Internal Revenue Service (IRS). State income tax returns and local tax returns must also be filed if they live in a state and/or local jurisdiction that requires a resident to pay income taxes there.
However, most people do not know that, unlike most of us, professional athletes have to not only file taxes where they reside but they are also dinged with the so called “Jock Tax” in that they must file tax returns and pay income taxes in every other jurisdiction where they get paid to play games/matches during their season. This can be a big job to organize all of this information, prepare & file the tax returns & ultimately pay the required tax in each jurisdiction that requires such income tax to be paid based on “Service Days” or the number of days out of the year that they were paid to perform in that jurisdiction. Most athletes do pay a professional to prepare these returns but the ultimate responsibility still lies on their own shoulders.
Athletes could and do pay as much as 50% or more of their total income in taxes and in a sport like football the athlete may have to prepare up to 10 and maybe more tax returns for various jurisdictions. For top level Basketball, Baseball & Hockey players the tax filing obligations are much greater simply due to the number of locations where they play games each season (NFL teams only play 8 away games during the season).
It would be nice if professional athletes knew how to deal with these financial issues prior to entering their respective leagues but the reality is that most do not. In recent years the players associations of each league have been doing a better job of helping incoming players deal with these types of issues as well as with other responsibilities that are required of the players as pros.
Just know that our pro athletes may have it “Made in The Shade” in some respects but they also have many personal as well as financial responsibilities that go along with that.
Adam L. Prossin, Esq.