For student-athletes earning income through Name, Image, and Likeness (NIL) deals, understanding IRS Form 1099 is essential. Here’s a clear guide on how NIL income is reported using 1099 forms and what athletes need to know to ensure accuracy and compliance.

What is Form 1099?

Form 1099 is an IRS tax form used to report income earned by individuals classified as independent contractors or freelancers. Unlike employees receiving a W-2, student-athletes receiving NIL income typically receive a 1099, reflecting earnings not subjected to payroll tax withholding.

When Should You Expect to Receive a 1099?

Businesses and individuals must issue a 1099 form by January 31st to anyone they paid $600 or more during the previous tax year. Expect a separate Form 1099 from each sponsor, endorsement partner, or entity you collaborated with during the year.

Types of 1099 Forms Relevant to NIL

• 1099-NEC (Nonemployee Compensation): The most common form received by student-athletes for services like endorsements, appearances, or social media promotions.
• 1099-MISC (Miscellaneous Income): May be issued for royalties, prize money, or other payments not classified as nonemployee compensation.

What to Do with Your 1099 Forms

Upon receiving your 1099 forms, verify all information carefully, including your name, Social Security number, and payment amounts. Report all 1099 income accurately on your tax return, as the IRS also receives copies of these forms and cross-checks them for accuracy.

Reporting Income and Deductions

Your 1099 income must be reported on Schedule C (Profit or Loss from Business) when filing your federal tax return. Additionally, you can deduct eligible business-related expenses such as travel, training, equipment, marketing, legal fees, and agent costs to reduce your taxable income.

Understanding Tax Obligations

Since 1099 income does not have taxes withheld upfront, you are responsible for calculating and paying self-employment taxes, which include Social Security and Medicare (approximately 15.3%). You should also plan to make quarterly estimated tax payments throughout the year to avoid penalties.

Handling Errors on Your 1099 Forms

If you notice discrepancies or errors on your 1099 forms, immediately contact the issuer to request a corrected version. Accurate forms are crucial to avoid issues with your tax filing and potential IRS audits.

Importance of Professional Guidance

Given the complexities surrounding NIL income and tax reporting, partnering with a CPA experienced in NIL taxation is highly beneficial. They can provide guidance on accurately reporting income, optimizing deductions, and complying with federal and state tax laws.

Keeping Organized Records

Maintain comprehensive records of your NIL activities, payments received, and related expenses throughout the year. Good record-keeping simplifies tax reporting, ensures compliance, and supports deductions you claim.

Final Thoughts

Understanding how NIL income is reported through 1099 forms is crucial for student-athletes managing new financial responsibilities. Staying informed, organized, and proactive in working with tax professionals helps ensure compliance, reduces stress, and supports your financial well-being both now and in the future.