Hey there, athletes!
It's your friendly Certified Public Accountant (CPA), Insogna CPA, here to share some tips to help you understand how to save money on taxes from your Name, Image, and Likeness (NIL) earnings.
Taxes can be confusing, but don't worry—We’ll break it down into easy-to-understand tips so that you can keep more of your hard-earned cash!
When you're making some sweet cash from your NIL activities, the government wants a piece of that pie. They call it taxes.
And guess what? It's not just about federal income tax. As a 1099 contractor raking in your NIL dollars – 1099 money is what you make when you are not a W2 employee of a company - you gotta deal with your own FICA payroll taxes too, which includes Social Security tax and Medicare tax.
But fear not! Setting up an LLC-SCorp can actually help you save some dough (more on that below).
Think of IRS taxes as a fee you pay to earn money. But here's the cool part: with some clever tax strategies, you can reduce the amount of taxes you owe and keep as much of that hard-earned cash in your pocket as legally possible. Cha-ching!
Once the IRS starts auditing NIL deals and collectives, you could find having a strong relationship with a CPA firm extremely valuable.
First things first, it's important to understand that as a 1099 contractor earning NIL monies, those are taxable income no matter what your age. That means the IRS wants its fair share of your success.
However, don't worry! With proper planning and a few smart strategies, you can minimize the amount of taxes you'll owe.
Let's break it down here. We're gonna talk taxes and a cool trick to keep some serious cash in your pocket. So listen up: setting up a business entity, like an LLC (Limited Liability Company), is a genius first move.
Why? Well, it's like a shield for your brand name and it can actually help you save a ton on taxes, especially if your net profit (that's what's left after you subtract your expenses from your income) is well above $50,000 a year.
Plus, you can keep your personal money separate from your NIL (business) earnings and budget for things like taxes owed. Your own LLC is like having an extra layer of protection and even scoring some sweet tax advantages if you file as an S-Corporation.
Listen up, rising star! ⭐
When you're hustling and making those sweet NIL monies, you're gonna come across various expenses related to your NIL activities. Yep, you heard me right! If you're earning NIL income, you've likely got some NIL-related expenses too. It could be stuff like training, equipment, travel, or even marketing and branding costs.
But here's the awesome part: many of these expenses can be deducted from your income. That means they can help lower the amount of taxes you pay to the government.
As a NIL earner, it is important to plan ahead. Getting paid NIL monies is also known as a 1099-contractor, which means you're in the self-employment game. And guess what? It means you're responsible for paying both the employee and employer portions of Social Security and Medicare taxes, potentially state unemployment taxes, and federal income taxes. Don't worry, we’ll break it down for you.
We have a detailed post "Tax Hacks for Winning Athletes" that covers a lot more.