Football is a big-money game, and its highest-stakes event, the Super Bowl, is about to take center stage. The winning athletes will earn an extra fortune -- likely to be nearly $100,000 -- in addition to their salaries, and the losers of the championship game will receive about half that amount. Plus, each player gets a bonus for conference championship and playoff games. And then there are all those endorsements. For the marquee players, it's pretty good pay for getting banged up, bruised and concussed.
Now, I don't want to be a spoilsport when it comes to all this money, but football players -- and other professional athletes, along with entertainers and some traveling salespeople -- have some complex issues when it comes to paying taxes, not only to the federal government but also to the states and many of the cities where they perform.
It's called the "jock tax," says Steven Piascik, CPA, MT, who has created a personalized tax and financial planning CPA firm providing top professional athletes with a financial game plan for success. His firm does tax planning for headline athletes in all sports, working with investment professionals and agents, to keep athletes on track for long-term financial security.
But Piascik goes far beyond filing tax returns in multiple jurisdictions. His real value is in creating appropriate tax strategies for athletes so the governments don't take half of their earnings.
Piascik notes that NFL players typically must file returns in 10 to 12 taxing jurisdictions, including local cities. NBA basketball players must file in as many as 20 jurisdictions. Baseball and hockey players may need to deal with taxes in as many as 26 locations, including some foreign taxes levied on games played in Canada.
It's not just game days that may be taxed. The state and local taxing bodies look at "duty days," which include spring training, training camp, practice days, travel days and contractual public appearances. Plus, these taxes apply not only to players but to coaches, trainers, medical staff and equipment managers who travel to the games.
In fact, says Piascik, as an adviser he often calculates the after-tax implications for a player of accepting a contract in a high-tax state (and city) compared to a low-tax home team base. That has resulted in agents demanding higher offers to players to compensate for the extra tax-bite in a place like New York City. Since states like Florida, Nevada, Tennessee and Texas have no state income tax, their sports teams can be very attractive. Similarly, Piascik has advised some athletes to live in New Jersey, even if they play for a New York team.
These strategies for these athletes have some applications for anyone who works in different locations during the year, or who has the option of creating a home base in a lower-tax city or state. The advice, whether you are a professional athlete or perhaps a traveling salesperson, is similar:
--Document everything. Keep track of expenses not reimbursed by your employer, including transportation, car rentals and meals while on the road. (Players get to deduct agents' fees.)
--Don't forget to claim any other benefits that are non-cash. (Players must declare the value of "swag" they receive at awards ceremonies.)
--Get good tax advice -- not just form filing -- from a firm set up to know about filing rules in various states. Every state has different taxation rules. Mistakes can not only cause liabilities for back taxes and interest but also generate multiple audits and the headaches and fees that go with them.
With football making headlines, and tax season around the corner, it's time to think like a pro. It's one thing just to "get your taxes done." It's quite another to do some tax planning. It's worth getting the big picture advice of a tax adviser who thinks not only about this year's return but also looks down the road. And that's The Savage Truth.