Just Askin' | How is NIL money taxed?
Oct. 30—How should college athletes report name/image/likeness money on their taxes?
The NIL tax world is emerging and complex, but there are a few principles athletes can keep in mind.
Accountants from Champaign's Martin — Hood were invited to lay out their knowledge last week at a well-attended tax education session with several University of Illinois student-athletes.
"Back in the day, any payments to student-athletes were under the table and probably went unreported," said Jim Eisenmenger, longtime Martin — Hood CPA. "Now, in this new world, it's somewhat out in the open, and I think the IRS is going to pay a lot of attention to it."
Eisenmenger and his colleagues Cody Emberson and Jacob Overton covered the basics for the group.
"They were very attentive, very respectful. I think that the U of I has done an excellent job with their NIL program," he said.
One of the big lessons the accountants tried to impart on the student-athletes: They are now, in essence, small-business owners.
The strong No. 2, he said, is that non-cash compensation is still taxable. Any items, equipment, anything traded, bartered or received as part of an NIL deal fair game. No. 3 is being mindful of self-employment tax, which can trigger at surprisingly low income levels.
"It's very different from getting a job as a student, and getting a W-2 where everything's reported and neat and clean," Eisenmenger said. "There's no withholding, so it's very easy to get yourself behind the 8 ball if you don't plan, get some reasonable tax projections and set some money aside."
Bottom line: Any student-athlete trying to profit off their likeness should seek professional consultation.
"It's up to the student-athletes to either engage us, or engage someone. If you, or your parents have a relationship with a reputable CPA, by all means, contact them," Eisenmenger said.
"Whether it's us or them, you really need to be talking with someone."
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