NIL taxable as income?

#3
#3
They are probably making income from their likeness a business, LLC maybe? They will be allowed to deduct all expenses as an LLC. I am sure there are many many people guiding them and even more trying to guide them. Relatives they have not seen in years dropping by for tea.
 
#4
#4
#5
#5
VOLtaism said:
They are probably making income from their likeness a business, LLC maybe? They will be allowed to deduct all expenses as an LLC. I am sure there are many many people guiding them and even more trying to guide them. Relatives they have not seen in years dropping by for tea.
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I have an LLC with my spouse. It's true the LLC's tax return is only informational, but income or losses carry to our personal return. We could have elected to be taxed as a partnership or a corporation. My wife and I chose S corporation since it was best for our situation. Our business is straightforward, so we only needed to work with a CPA to guide setting everything up. I did a lot of the paperwork myself to keep cost low. Some of these NIL deals may need tax counsel.
 
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#6
#6
NV Vol said:
I have an LLC with my spouse. It's true the LLC's tax return is only informational, but income or losses carry to our personal return. We could have elected to be taxed as a partnership or a corporation. My wife and I chose S corporation since it was best for our situation. Our business is straightforward, so we only needed to work with a CPA to guide setting everything up. I did a lot of the paperwork myself to keep cost low. Some of these NIL deals may need tax counsel.
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Yes, thats the idea. You can't avoid personal tax of course but you need a vehicle to deduct expenses. I think you can do it within the 1040 and deduct work related expenses but that sounds messy. I never did it that way because of fear it would trigger an audit.
 
#7
#7
Think they may have to pay taxes for their home of record. That requirement may vary by state.
 
#8
#8
Can also be taxed by any state they PLAY in ?? I believe when professional athletes play in New York ( for example) they are liable for state taxes there. IF states go after that piece...it could get real messy for college players with FAT NIL money coming in.
All part of the "Brave New World" of college athletics.
 
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#9
#9
guido4198 said:
Can also be taxed by any state they PLAY in ?? I believe when professional athletes play in New York ( for example) they are liable for state taxes there. IF states go after that piece...it could get real messy for college players with FAT NIL money coming in.
All part of the "Brave New World" of college athletics.
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Probably not since they aren’t paid for playing.
 
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#11
#11
DuckinVol said:
Probably not since they aren’t paid for playing.
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While it isn’t wages for playing, if they did any work related to an NIL deal for which they were paid while in another state, theoretically they would owe tax on that portion of their income to that state.

They could also exclude that portion from their home state income calculation.

Pretty sure Spyre has it together in this regard for their clients. Maybe @WillAtSpyre can confirm? Each player with a deal should definitely seek the counsel of a CPA.

Tax attorneys usually only show up when you’re into the hundreds of thousands and really over a barrel. That’s also usually when the IRS shows up. I think that’s why tax attorneys are so expensive in relation to other counsel.
 
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#12
#12
I would think it’s for sure taxable, aside from any amounts you can deduct. All NIL deals would be subject to federal tax rates, so we’re really just talking about the state income tax, which can range between 0 and 5% in most cases (for states with schools we would compete with).
 
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#13
#13
guido4198 said:
Can also be taxed by any state they PLAY in ?? I believe when professional athletes play in New York ( for example) they are liable for state taxes there. IF states go after that piece...it could get real messy for college players with FAT NIL money coming in.
All part of the "Brave New World" of college athletics.
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I would think this does not apply to college athletes because they are not paid to play (wink, wink, nudge, nudge). The “earnings“ are in their place of residence or where they are earning the money.
 
#16
#16
Volunteer08 said:
I would think it’s for sure taxable, aside from any amounts you can deduct. All NIL deals would be subject to federal tax rates, so we’re really just talking about the state income tax, which can range between 0 and 5% in most cases (for states with schools we would compete with).
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What deductions could an 18 year old college"student" possibly have?
 
#17
#17
SpaceCoastVol said:
What deductions could an 18 year old college"student" possibly have?
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Good question. Pure speculation here, but if they're working then they must have expenses associated with it. A car, gas for the car, therapies for body health, training programs, etc. When your health and your body is the primary tool used for work, you can probably get pretty creative. I'm not speaking from professional experience, but I've dabbled in creativity for tax purposes a time or two.
 
#18
#18
I was wondering if this would be reported on a 1099 as contracted non-employee wages and thus taxable.
 
#20
#20
Hmmm, when I was in the military we went TDY (temporary duty) numerous times to various states but never had to pay taxes to those states.
My son in law who is a civilian has gone to meetings in various states but is not required to pay taxes in all those states.
Yes there is a jock tax but I don’t think the NIL applies but I am no tax expert.
 
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#21
#21
Raebo said:
Think they may have to pay taxes for their home of record. That requirement may vary by state.
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I think one has to pay state income tax in their state of residence, if that state has a state income tax. I foresee a lot of new residents in Tennessee as soon as the signee's come here.
 
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#23
#23
Starchief13VFL said:
I would assume it is. No income tax Tennessee should be a great selling point. Thoughts??
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If it's income the IRS will tax it. However in the case of Nico if he changes and earns his NIL in Tennessee he will not have to pay those high state of Cali income taxes. But it can be tricky and depends where and how the payout occurs for instance, states like New York and Cali go after professional athletes on out of state teams if they play a game in those states and the payout is structured on a per game basis, then those states want their share of that. A good tax attorney and agent can make a big difference. For instance the Atlanta Braves player on their World Series team recently went to the West coast for "more money " and got there and after state and local taxes got through with him, found out he actually took a pay cut to a team he didn't like all that much. It was reported he cried on his first trip back to the ATL with his new team. The devil IS in the details.
 
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#24
#24
Remy said:
If it's income the IRS will tax it. However in the case of Nico if he changes and earns his NIL in Tennessee he will not have to pay those high state of Cali income taxes. But it can be tricky and depends where and how the payout occurs for instance, states like New York and Cali go after professional athletes on out of state teams if they play a game in those states and the payout is structured on a per game basis, then those states want their share of that. A good tax attorney and agent can make a big difference. For instance the Atlanta Braves player on their World Series team recently went to the West coast for "more money " and got there and after state and local taxes got through with him, found out he actually took a pay cut to a team he didn't like all that much. It was reported he cried on his first trip back to the ATL with his new team. The devil IS in the details.
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Would NIL payouts work like that? Technically, these guys are getting paid for name/image/likeness, not for playing in football games. Professional football players receive a salary for playing games, those games occur in many different states, so each state wants their cut of the earned income. In contrast, guys receiving NIL money are being paid for the use of their name, not for playing in any game in particular, and he's a resident of Tennessee. Why would any other state have a claim on those earnings?

I don't think LeBron James, for example, owes state taxes to states where he played NBA games on his endorsement income. He'd owe federal and CA taxes on that (since he's a resident there), but not any other state.
 
#25
#25
CPA here. There is a lot more that goes into this than you would think at first glance.

1. NIL will be taxed by the IRS. I imagine there will be several possible deductions, including professional fees to attys and accountants, finders fees, marketing, web development, managed social media, etc. These are deductible whether they form an entity like an LLC or S-Corp or not. It's just like any other small business. Think of them as running their own marketing agency.
2. Unless they form an LLC or corporation, TN has no individual income tax. There will likely be an annual business license that they have to pay for. If they sell merch, they will have to pay sales tax. If they form an LLC or corporation, they will be subject to TN Franchise & Excise Tax.
3. I would expect exposure to tax in other states to be limited. If Nico booked a speaking gig at a HS camp in CA, that would be taxed in CA. He should also domicile in TN before finalizing that contract. He should buy or rent a TN house, change drivers license, voting registration, etc. CA will do everything it can to get its grimy claws into anyone leaving their state.
 
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