Free tax help for college athletes
Tax season is upon on and many college athletes are making money for the first time and are away from home. Since college athletes, and some high school athletes, are able to legally monetize their name, image, & likeness, tax implications come into play.
Don’t fear, because I have gathered some resources to help you make sense of your next steps in the world of taxes. This information applies to many individuals who make under a certain income each year, but the article will focus on college athletes.
Before we get started I have to make the following statement: Disclaimer: If you need tax help, reach out to a certified tax professional in your area. I am not providing tax advice and am not a tax professional. This article is also not legal advice and does not establish an attorney-client relationship. If you are in need a legal counsel, please reach out to a licensed attorney in your area.
Now with that out of the way, let’s talk about a few considerations when it comes to tax and name, image, and likeness compensation. H&R Block has a great article on this topic, which I have broken down below and supplemented with some additional information.
Background on Taxes & NIL
Dependency Status. Financial support is one of the criteria to consider in regards to NIL. If parents provide more than 1/2 of their child’s financial support, they may be able to claim them as a dependent. Support includes paying for expenses such as food, clothing, lodging, medical/dental care, and education.
Think about how much money the athlete is receiving from sponsorships. If that NIL income is more than the support from parents, then the athlete likely no longer qualifies as a dependent.
Self-employment status and tax obligations. NIL income is generally viewed as self-employment. It is important to check your contracts to determine whether the brand considers you an employee or independent contractor.
Once you’ve made more than $400 as an independent contractor, you’ll be required to pay self-employment taxes and you may also owe income taxes. You may also qualify for a self-employment tax deduction.
Always keep track of everything in an excel spreadsheet and update it as you go. Waiting until the end of the year will be a nightmare.
State tax obligations. If you have NIL sponsorship deals where you are working in multiple states, you may be required to file resident and non-resident returns.
Resident state. This is generally the state where you’re from or where your parents live. Unless you’ve officially changed your residency, you’ll file a resident return for your home state.
Non-resident states. You may need to file a return in each state that you’ve earned income. This could potentially be where your school is located, states you have made appearances, or states you have shot commercials.
Filing multiple state returns doesn’t mean double taxation. Laws vary from state to state so what applies to you will depend on your unique situation.
Financial Aid Implications. If your financial aid or scholarships are aid-based, such as a Pell Grant or other federal award program, your eligibility could be impacted.
Because your sponsorship money is considered taxable income, you must include it on your Free Application for Federal Student Aid (FASFA). The additional income may mean a reduction in the amount of aid that you receive.
Speak with your financial aid point of contact or your NCAA compliance department to check on this.
Free Tax preparation services
There are many free tax preparation services offered by the IRS, but they do have some requirements in order to participate in them.
The IRS's Volunteer Income Tax Assistance (VITA) program offer free basic tax return preparation to qualified individuals. This program offers help to:
People who generally make $60,000 or less
Persons with disabilities; and
Limited English-speaking taxpayers
2. IRS Free File lets you prepare and file your federal income tax online using guided tax preparation, at an IRS partner site or Free File Fillable Forms. There are two services available under this program. One program allows you to have guided tax help through free software if your adjusted gross income is less than $73,000. The other part of the program allows those who make over $73,000 the use of the IRS’ free fillable forms.
Tips to stay on top of your taxes
Start keeping an excel spreadsheet of your income and expenses now
Start keeping a budget to make it easier to keep track of where your money is going
At the end of each month tally up your income and expenses
If you are self-employed or a 1099, then save at least 30% of your income so you won’t be scrambling to pay taxes at the end of the year
It really is easy to become more financially savvy. You can do this and if you need help there are many free services to help you take that first step in this new world. For more tips, read my latest article: 4 ways for athletes to become more financially literate.
**DISCLAIMER: I am not a licensed financial advisor or tax professional. All of the information found on this site is for educational purposes only and should not be taken as financial advice.**