Just asking | How is NIL money taxed? | Entrepreneurs

How should college athletes report money for name/image/likeness taxes?

The tax world of NIL is new and complex, but there are a few principles that athletes should keep in mind.

Accountants of Champaign’s Martin | Hudow was invited to share his knowledge last week at a well-attended tax session with several University of Illinois student-athletes.

“At the time, any payments to student-athletes were under the table and probably not reported,” said Jim Eisenmenger, longtime Martin | CPA hood. “Now, in this new world, it’s kind of out in the open, and I think the IRS is going to pay a lot of attention to that.”

Eisenmenger and colleagues Cody Emberson and Jacob Overton reviewed the basics for the group.

“They were very attentive, very respectful. I think the U of I did a great job with their NIL program,” he said.

One important lesson the accountants tried to convey to the student-athletes is that they are now essentially small business owners.

Strong No. 2, he said, is that non-cash compensation is still taxable. Any items, equipment, anything that is traded, exchanged or obtained as part of fair play is NIL. #3 be aware of the self-employment tax, which can kick in at surprisingly low income levels.

“It’s very different from getting a student job and getting a W-2 where everything is reported and neat and clean,” Eisenmenger said. “There are no withholdings, so it’s very easy to get yourself into the 8 ball if you don’t plan, get some smart tax predictions and put some money away.”

Bottom line: Any student-athlete trying to capitalize on their likeness should seek professional advice.

“It’s up to the student-athletes to attract us or attract someone else. If you or your parents have a relationship with a reputable CPA, be sure to contact them,” Eisenmenger said.

“Whether it’s us or them, you really need to talk to someone.”