TaxAct filing expert simplifies taxes for college athletes earning NIL income [PAID CONTENT]

This year, college basketball and tax season will collide like never before, as many student-athletes across the country who have earned income from their name, likeness and likeness (NIL) face taxes for the first time. Must collect. TaxAct’s tax expert, Jackson Echols, has all the information these players need to know about filing this season.


What is NIL income?

Beginning in 2021, NCAA policy changes allowed players to earn revenue for the use of their name, image and likeness (NIL). This change represents a significant opportunity for college athletes, allowing many to earn brand endorsements in 2022. However, the tax implications can be confusing and create unique challenges for student-athletes, especially if they are new filers.


NIL Types of Income

NIL income is taxable, meaning it must be reported on a tax return and is subject to individual income tax. Generally, NIL income falls into two categories: “monetary” and “non-cash.”

Monetary compensation includes payments made to a player for endorsements, appearances, sponsorships, social media partnerships, and autograph signings.

Non-cash compensation can be more difficult to identify. “All ‘freebies’ received for endorsement deals – such as free cars, trips, apparel, athletic equipment, and even cryptocurrencies are taxable”, explains Echols.

While it may seem like a confusing process, DIY tax software, like TaxAct, makes filing as easy as possible, says Echols.


What forms do you need?

According to the IRS, when generating NIL income, college student-athletes are independent contractors, and their NIL income is self-employment income. This comes with a few logistical considerations when dealing with companies on NIL deals, including which form to file with.

There are basically two required tax forms: the 1099-NEC and the 1099-K.

“If the value of NIL compensation from a company is more than $600, that company must send a Form 1099-NEC to the athlete,” explains Echols. The 1099-NEC details the payment.

Amount and value of equipment received by the athlete.

However, if the payment is received from a third-party platform, such as PayPal or Venmo, a Form 1099-K may be sent instead.

Depending on the number of brand deals, the number of forms may vary, but all revenue must be accounted for. “Information should be reported from all forms received when filing a tax return,” says Echols.


Staying organized is the key.

It is important to keep all tax documents organized as the number of forms required to file can vary. Additionally, players with net income of $400 or more are required to pay self-employment tax. Self-employment taxes are 15.3% of net income. Therefore, it is important for college athletes to keep all financial and tax documents as well as related receipts in an organized and safe place to save time, stress and hassle when filing tax returns. Being able to reference receipts for expenses related to your work with brands or companies can help reduce their tax liability and the amount of self-employment tax that is owed. Echols emphasizes that TaxAct makes it easy for college athletes to navigate this new tax situation and file with ease and confidence.

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