Getting Ready for Tax Time
With taxes due soon, it is important to understand the details of what you need to do in order to file your taxes before Uncle Sam comes after you.
My first year in the League, I had no idea what I was doing. I actually thought my CPA was trying to bamboozle me. I remember calling my dad and telling him that the guy I hired is making me pay these random taxes in a bunch of states I don’t live in. My dad just laughed and said “Welcome to adulthood!” I still have a hard time understanding the whole jock tax rule.
My CPA wasn’t scamming me to my knowledge, but he did fail to make sure I properly filed my taxes. When I first did my taxes, I forgot to include my signing bonus and sponsorship money earned when disclosing my income. So when I received a letter from the IRS a couple months later, you could imagine my reaction. This whole ordeal wasn’t solely the CPA’s fault, but a good CPA would have made sure I had everything in order to not face these issues when payment time came. I partly blame myself because, since I had no idea what I was doing, that led to the extra disarray when it finally became time to handle my taxes.
When you are doing your taxes, it is important to at least have common knowledge of what you need to provide when filing time comes. If you don’t know, make sure you do your due diligence when hiring a CPA to file for you. You don’t want to have to go back a make up payments, find receipts, pay a fine, or even end up going to jail because of a simple mistake that could have been taken care of prior. Not everyone has the luxury of being a Barcelona player.
There are a bunch of other discrepancies that many people more qualified than me may tell you to do when it comes to filing your taxes. For me personally, it comes down to these main things to get off on the right foot.
Make sure you provide all your information and documents:
W-2 forms , 1099 forms, investment Income, business Income, rental property Income, gambling winnings, etc.
W-2 and 1099 forms should be from all your employers. For example, if you are sponsored by Nike or Adidas or another company and they pay you a salary or bonus you are obligated to provide forms from those companies.
- Business income, for example would be if you ran a camp, you would have to file taxes for that as it is a business.
Hire a good CPA
- Hiring a good CPA not only protects you, but it gives you peace of mind. Make sure you do your due diligence and research, and don’t be afraid to cross check or ask questions. You are the one paying so it is important you make the right investment for what you want to get.
There are a number of tax deductions an individual can claim if qualified for. As athletes you are eligible for deductions that ultimately help lower your taxes as long as they are qualified deductions. A few examples of tax deductions include:
- Charitable donations
- Moving Expenses
- Education Costs
- Childcare Costs
- Agent and Manager Fees
- Union Dues
- Gym Memberships
- Professional/Legal/Accounting Fees
- Car Mileage
Click here to see a good example of what a pro athlete's tax return looks like....