We Specialize In Working With College & Professional Athletes – These Are Our Top Financial Tips

No doubt, it has been exciting to read about all the deserving college athletes who have signed NIL deals since the NCAA determined they are allowed to.  “NIL” stands for name, image, and likeness and, since July of this year, those playing college sports have been allowed to accept compensation for it. That compensation can be in the form of goods or money – and in most cases, we are seeing the latter taking the lead.

At Holbrook & Manter, we agree this change is exciting, but our minds automatically turn to the responsibilities that come along with earning this type of money. Without the proper planning and execution, college athletes engaged in NIL deals could find themselves in financial distress. To avoid this, athletes should actively be working with an experienced CPA to remain compliant and a trusted attorney to review contracts and deals from the jump.

Here are some other ways you can secure a lucrative future without drowning in financial headaches.

1) Obtaining An EIN Number

The athlete should apply for an Employer Identification Number (EIN) form the IRS. This is important to have in place if asked to provide W-9’s, as it prevents you from always giving out your social security number.

2) Play Prevent Defense By Establishing an LLC

Consider creating an LLC (for most athletes this will be a single-member LLC), in the state where you will be conducting business. This can serve as a layer of personal protection from the business.

3) Be Meticulous With Your Financial Stat Tracking

If you will be earning money in different cities, states, even countries, you and your CPA should be keeping track of where every dollar is being earned. Depending on the amount, you could be asked to file state and local tax returns in various locations.

4) Don’t Mix NIL Money With Personal Funds

Speaking of tracking dollars, you will want to open a business bank account to easily track business income and expenses. If you mix NIL dollars with personal funds, you will be creating a potential tax nightmare.

5) See The Whole Field By Working With A College Athlete Tax Pro

Notice we are talking a lot about taxes here. This is why every athlete must be engaged with a CPA. Most of the income from a NIL deal with NOT have taxes withheld, therefore the athlete will want to make estimated tax payments in some cases to avoid penalties. Furthermore, the accountant will need to be the one preparing and filing the tax returns associated with all NIL deals. They won’t be cut and dry tax-wise so the expertise and guidance of the accountant will be key.