College athletics just got a whole lot more complex with the introduction of Name, Image, Likeness (NIL) deals. While student-athletes can now profit from their fame, they also face new tax responsibilities. This can be confusing, especially for first-time tax filers. Let’s break down the key points to keep you on the right side of the IRS.
Understanding NIL Income as Taxable Income
Money, goods, services – it all counts! Any form of compensation you receive through NIL activities is considered taxable income. This includes free products for endorsements, autographed merchandise sales, and even those trendy NFTs. Basically, if you’re getting something of value for your NIL, it’s taxable.
Are You an Employee or an Independent Contractor?
This matters for tax purposes. If you’re considered an employee, you’ll fill out a W-4 form. However, the mostly likely scenario is to be classified as an independent contractor, in which case a W-9 form is needed.
Tax Filing Requirements and Potential Steps
The amount you earn and your dependency status determine your filing requirements. You might need to file a federal tax return if your NIL income is over $400 or exceeds the standard deduction, especially if your parents claim you as a dependent. Here’s what you might need to do:
- Track your NIL income and expenses. Keep good records!
- Pay estimated taxes quarterly. Don’t get hit with penalties by waiting until tax season.
- File tax forms. Depending on your situation, you might need a Schedule C or Schedule E with your Form 1040.
Knowledge is Power
NIL deals are a game-changer, but with them comes tax responsibility. By understanding your tax obligations and keeping good records, you can avoid any unwanted surprises come tax season. Remember, Lakeesha V. Browne, CPA is here to help you. Reach out today for a free consultation and discover how she can support you. Stay informed, stay compliant, and focus on winning – both on and off the field!
