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If you live in one state and work in another, you must let the IRS know when tax time comes.
If you work in more than one state, this is also something you need to tell the IRS. And for professional athletes, competing on the road makes calculating income taxes very complicated.
“Take, [for] for example, a professional baseball player. How many cities does that baseball player play in? They sometimes owe a tax return in ten to 15 states. So it can be a bit difficult. For a first-time pro athlete, when they first get their check, it’s great, and then they realize, ‘I have to pay taxes everywhere,'” says tax attorney and CPA Rich Hofmann.
Hofmann says professional athletes need to track where they are when they work out. But, he says, for most professional athletes who work for an organization, the organization will do the tracking.
Hofmann also says how an athlete’s contract is structured can affect where their income taxes are paid. “They might be able to structure some of their compensation as deferred compensation. There might be some things they can do in terms of signing bonuses and residency once that bonus is realized. So there are some really cool things you can do, but again, it really depends on the player and the facts and circumstances.”
Hofmann says professional athletes should get an agent who knows what’s going on and has access to tax expertise.
