It's all about keeping your eye on the prize when you're making a career as an athlete. Unfortunately, that doesn't always leave a lot of time for keeping your eyes on your accounting books. There's really no career that's as unique and "outside the box" as an athletic career. You're keeping score while everyone else is keeping nine-to-five hours. You're the one in charge of making sure your accounting practices are what they should be because you don't have a traditional employer keeping track of it all.
You're already living the reality that training, competing and staying in touch with the fans that put you where you are all take up most of your time. This is why so many athletes struggle to maintain clean, orderly accounting practices that allow them to stay current with tax obligations while planning for a very bright and secure post-career future. Do you feel like you're slipping up when it comes to accounting and tax planning for athletes? This can be fixed.
Should You Bring In A Financial Adviser For Athletes
Let's talk about all of the unique aspects that go into bookkeeping for athletes to help you get a picture of just how many dimensions there are to getting your books right. The big thing to take away after considering all that you're responsible for is that having a plan with an accompanying system is really the way to come out ahead when it comes to bookkeeping and tax planning for athletes. Waiting until tax time to look at your finances is like waiting until the first day of the season to begin training. This is exactly how a lot of athletes run into trouble as far as losing track of income or owing money to the IRS. The goal needs to be getting a year-round system in place for creating accurate, consistent record keeping.
The Very Unique Considerations That Go Into Accounting for Athletes
Most people look at questions regarding whether or not they can claim a new laptop as a business deduction when doing tax planning. Athletes have to question which state they should even be claiming residency in when filling out tax forms. Rookie and traveling players often have questions regarding whether home is where they're from or where they play. One commonly overlooked aspect of tax planning for younger athletes is how to claim residency to get the best tax benefits without doing anything deceitful, unethical or illegal.
Anyone who plays is already familiar with what a CPA for athletes would call the "jock tax." This rule requires athletes to report their income in every state that they play in throughout the course of a year. This inherently complicated tax rule can become even more complicated if you're traded or change leagues during the year.
Royalty deals can also make for some complex bookkeeping for athletes. Unfortunately, many athletes don't even know how much is owed to them during any given year because keeping track of what is earned can be complicated. What complicates matters further is that royalty deals can shift from year to year based on performance. That means that what worked for your tax situation one year may not be so ideal the next year. You need to get it all on the books in real-time instead of trying to catch up later.
That's not the end of the tax confusion. Did you know that the way you will need to handle income from a signing bonus could be determined by how the bonus is paid out to you? There's also quite a bit to consider when it comes to how newer tax rules will impact your ability to deduct athletic equipment. Assuming that you should deduct equipment on an itemized basis may not actually be a smart idea.
Let's get to the swag now. Athletes are often given all types of gifts and promotional goods as bonuses or compensation for appearances. It turns out those "free" gifts do come with some strings attached. The IRS could be looking at what you've been receiving because they want a piece of the pie. Many gifts are actually considered taxable income. That means that failing to report the swag you've collected throughout the year could land you in hot water if the IRS digs around once you've filed your taxes. This is where having a system in place for keeping really impeccable records is going to mean everything.
Is Someone Looking Out for You While You've Got Your Eye on the Prize?
Your prime years as an athlete shouldn't be spent worrying about the details of accounting for athletes. The unique considerations we've discussed here really just represent the tip of the iceberg when it comes to what's on the plate of the average working athlete. For this reason, specialized CFO advisory service for athletes can help ensure every penny you're earning is performing the way it should be. We at Fusion CPA focus on equipping professional athletes with strategies for long-term financial health. Our team of seasoned accountants can provide a tailored, strategic plan based on your specific long-term and short-term goals. With guidance from a CPA for athletes and full-scale CFO advisory for athletes, you can rest because you have a step-by-step plan and tax professionals managing your financial life. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive