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that I have a better opportunity to play at a high
level; the possible NIL opportunities are a bonus.” Tips for student-athletes
Tax planning can be an integral part of the NIL
Here are some tips practitioners can give student-athletes:
agreement for the student-athlete and the collective
alike. ■ Get in touch with your athletic director, compliance office, or CFO of
Davis explains that this is another scenario for athletic services. Many large universities have resources for their student-
firms to aid a new market. Once the IRS starts athletes for such assistance.
auditing NIL deals and collectives, she said, clients ■ Contact your business school. Many schools offer free tax preparation
could find “having a strong relationship with a CPA or could introduce you to community organizations that offer Volunteer
firm extremely valuable.” Income Tax Assistance (VITA) program services.
Some collectives have filed for tax exemption
■ Discuss your situation with an accounting faculty member. Your professor
as Sec. 501(c)(3) not-for-profit entities, which
can likely connect you with a local CPA firm or alumni to prepare your
imposes additional regulatory burdens.
taxes and offer some tax planning advice.
“Some NIL collectives have gone the nonprofit
■ If signing with an NIL collective, ask the collective representative if they
route, which can be a bit concerning,” Davis said.
offer tax planning and preparation as a benefit.
“Nonprofits have additional IRS filings to the
■ If you are offered a noncash benefit such as food or a vehicle, note
public, and there could be some backlash on donors
taking tax deductions to pay athletes based on their that this is taxable in most scenarios. Ask your sponsoring company
name, image, and likeness.” or collective if they will add a cash payment to the agreement at, for
Collectives that have successfully obtained Sec. example, 40% of the value of your noncash item. Saving this cash for your
501(c)(3) status need to operate carefully and could tax return will improve the likelihood that you have the additional dollars
benefit from the support of a CPA firm. To not available for your tax liability. Investigate whether you may need to file
have revenue taxed as part of unrelated business estimated tax payments throughout the year.
income, the collective must make sure that all
■ Students profiting from their NIL are essentially running a business.
payments to student-athletes are made in an effort
Keeping good records of airfare, hotel, food, and other expenses when
to carry out the organization’s charitable purpose
performing your NIL contract is essential to reducing your tax burden.
rather than promoting goods or services. Often, this
Tracking the state of activity is also essential for state tax filings.
can include speaking engagements, autograph sign-
■ Get in touch with your financial aid office. Be aware that your NIL
ings, and appearances at other local not-for-profit
earnings have implications for the Free Application for Federal Student
entities to support their mission. It is also important
to note that these payments to collectives cannot Aid (FAFSA) if you are receiving federal aid.
exceed the fair market value of their services.
Reaching out to support a local university’s
athletic program is an excellent first step for firms
that want to be involved in the NIL space. Many 1099-MISC, Miscellaneous Information, reporting
universities are partnering with firms to offer these NIL compensation or payments.
services for their student-athletes, which can lead NIL entities send the Form 1099-NEC to
to tax representation. Networking and connecting student-athletes who receive direct compensation in
with NIL collectives to prepare reporting forms and the form of cash for a service. Again, no income tax
file returns is another area firms can benefit from. withholding necessarily applies. Payment settlement
entities provide a Form 1099-K to a student-
TAX TREATMENT OF NIL athlete if he or she is paid through a third-party
How is NIL compensation taxed, and what can network, such as Venmo or PayPal. A 1099-MISC
student-athletes’ CPA tax preparers expect as their is typically used when the student-athlete receives
clients receive income through NIL deals? Whether physical goods, rather than cash, for their services
the student-athletes are paid cash, given a car to and for royalties.
use, issued cryptocurrency, or even given free food, Student-athletes who do not plan appropriately
the value of these goods or services is subject to the can owe large tax liabilities, often money they don’t
self-employment rules under the Internal Revenue have, since, in many cases, they received goods
Code, and taxes can be significant. Students will rather than cash. One way to combat this problem
typically receive a Form 1099-NEC, Nonemployee is for the student-athlete to ask for some cash pay-
Compensation; Form 1099-K, Payment Card and ment as part of the NIL agreement. For example,
Third Party Network Transactions; and/or Form if a student-athlete is given a new Mercedes to

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