With the recent NCAA rules allowing Name, Image, and Likeness (NIL) earnings, student-athletes face new and exciting financial opportunities. However, managing these earnings involves substantial tax responsibilities. Here’s exactly what your Certified Public Accountant (CPA) needs to know about your NIL deals to help manage your taxes effectively.

Sources of Income

Clearly outline all sources of your NIL income for your CPA. This includes endorsement deals, sponsorship payments, social media revenue, appearance fees, merchandise sales, and royalties. Each income type may have distinct tax implications.

Details of Each Deal

Provide your CPA with detailed information about every NIL contract you sign. Essential details include payment schedules, contractual obligations, the duration of agreements, and potential bonuses. Understanding the specifics of each deal helps your CPA advise you on tax planning and compliance effectively.

States Involved in Your Earnings

If you earn income from multiple states—through appearances, sponsorships, or endorsements—this significantly impacts your state tax obligations. Ensure your CPA knows each state involved to accurately navigate multi-state tax filings and minimize your risk of penalties.

Documentation of Expenses

Maintain thorough records of all expenses related to your NIL activities. This includes travel costs, equipment purchases, training fees, marketing expenses, agent fees, legal costs, and promotional expenses. Accurate documentation is essential for your CPA to maximize deductible expenses, lowering your taxable income.

Entity Structure

Inform your CPA about your current business structure (sole proprietorship, LLC, S-Corp, etc.). Your CPA can provide advice on the most tax-efficient and protective entity structure for your NIL earnings, offering both liability protection and potential tax savings.

Quarterly Estimated Payments

NIL income usually classifies you as an independent contractor, requiring quarterly estimated tax payments. Provide your CPA with consistent updates on your income throughout the year. Your CPA can accurately calculate your estimated payments, ensuring compliance and avoiding unnecessary penalties.

Future Income Expectations

Share anticipated future NIL earnings and potential deals with your CPA. This helps in creating proactive tax strategies, including planning for retirement contributions, investment opportunities, and structuring future income to optimize tax efficiency.

IRS and State Notices

Promptly inform your CPA if you receive any notices or communications from the IRS or state tax authorities. Quick communication allows your CPA to handle inquiries or potential audits efficiently, mitigating risks and ensuring proper responses.

Financial Goals and Plans

Clearly communicate your financial goals and plans to your CPA. Whether you aim for long-term wealth accumulation, tax efficiency, or financial education, aligning your CPA’s strategies with your objectives will support sustained financial success.

Final Thoughts

Keeping your CPA well-informed about your NIL deals ensures comprehensive and effective tax management. Clear communication and meticulous record-keeping help optimize your financial health, maximize opportunities, and safeguard your earnings as you build your brand both on and off the field.