Frank Agostino participated in a webinar on name, image, and likeness (NIL) income, titled “The NIL Tax Playbook: Part 1,” presented by the American Tax Policy Institute and the American Bar Association (ABA) Tax Section.
The webinar gives student-athletes, parents, advisers, coaches, and athletic departments a practical introduction to the federal tax issues tied to income from paid endorsements and the like. NCAA rules allow student-athletes to earn money from NIL deals, but student-athletes may not be aware that they must pay taxes on the income derived from NIL agreements.
Frank was joined in the webinar by moderator Caroline Bruckner of American University’s Kogod Tax Policy Center, and fellow panelists IRS Stakeholder Manager Derek Ganter, and Sarah Green of Dentons.
The webinar covers the many ways student-athletes may receive income from NIL deals, including endorsements, sponsorships, social-media promotions, paid appearances, participation in camps and clinics, and merchandising, licensing, revenue sharing, and other arrangements in which they lend their name, image, or likeness.
In addition, panelists note that multiple parties — the student’s university, NIL collectives, businesses, sports agents, and other third parties — may be involved in NIL deals. Because of that, athletes and their parents should understand who or what entity is paying them and why.
Panelists emphasized that student-athletes could incur tax obligations even when payments are made in cash, they have not received a tax form (such as a W-2 or 1099), or the payment is described as a “gift.”
Because NIL payments do not always include tax withholding, the panelists discuss the need for athletes to keep records of and track their NIL income, set money aside for taxes, understand the contracts they may sign, and make estimated tax payments.
Panelists emphasized that student-athletes sometimes think of NIL payments as “free money,” but they should treat them as nonemployee compensation. Student-athletes also need to know that whether they receive a Form 1099 or not, or whether a Form 1099 is incomplete or missing information, the income must still be reported to the IRS.
“Gifts” or “favors” may also be taxable in some instances, and student-athletes need to understand that if they are given or provided with compensation – such as the free use of a vehicle or an expensive jacket – the IRS may consider those gifts taxable.
However, panelists noted that while scholarships that cover university tuition may not be taxable, other compensation, such as housing, food, stipends, and other payments may raise tax issues for student-athletes.
Students receiving NIL compensation may also create tax complications for their parents, if their parents continue to claim their child as a dependent for tax purposes. In addition, NIL payments could affect the amount of educational financial aid a student is eligible to receive.
Overall, the panelists note that student-athletes should get professional advice on their potential tax liabilities, use trusted tax planning services, understand how NIL income can affect their parents and financial aid status, and treat their NIL activity as a business that must comply with state and federal tax rules.
Find the full webinar here, or watch it below.
About Frank
During his four decades of practicing tax law, Frank has been the driving force behind many successful lawsuits that sought to establish fair tax enforcement principles for taxpayers. Frank has extensive courtroom experience, litigating more than 100 tax matters, several of which established important precedents for taxpayers.