LA Rams players must contend with headache of the jock tax

LA Rams fans are facing tax day soon.  Due to the continued presence of the coronavirus, the deadline has been pushed back from the traditional April 15 deadline to a more friendly May 17, 2021 filing deadline. Still, the deadline is pushed back. For some, the extension gives more time to assemble the return. For others? It’s just a longer version of the tax-filing migraine headache.

With the arrival of hundreds of rookies to the NFL, it’s a good time to talk about the NFL players’ worst nightmare – the NFL jock tax. If you didn’t realize this, NFL players play half of their games on the road. The Jock tax is the requirement that money earned for playing games at other states have a taxable claim to income earned in that state. And so, the player’s paycheck reflects that situation, citing withholdings in the states where games are played.

State income tax is withheld depending on the location it is earned. Texas, Washington, Florida, and Tennessee currently have no state income tax. Other states tax income on rates as low as 3% (Illinois) to as high as 10.3% (California). Road games require state withholding based upon two days of earnings in that particular state.

But withholding is NOT the same as taxes owed. Withholding is an estimated tax held out of an NFL player’s paycheck that approximates what the tax for that state may total when the appropriate tax forms are filed. Of course, when the taxes are actually filed, individual states may be due even more money (taxes owed) or a refund may be due to the taxpayer.

It gets very complicated very quickly.  New players who play for the LA Rams will face state taxes from their original state of residence, California state taxes for incomes earned in the state of California, and state tax liabilities for any incomes earned while playing in other states.  It becomes a tremendous burden for rookies who are new to the NFL, and perhaps may even be facing taxes for the very first time.

For players who are traded, cut, and re-signed elsewhere, or injured, it gets much worse much more quickly. Other industries have fought, and won, against these non-resident athletic taxes. Imagine the taxation nightmare of an over-the-road truck driver? But NFL players are big money, and revenue departments of states love to get new income streams. Perhaps this is an area the NFLPA can push back on?

It feels like a wash on a global scale. LA Rams players are playing in Tampa Bay, so no tax burden will be assessed, but Miami players are in San Francisco, so those players are subject to California state tax?  Well, something for the NFL and NFLPA to consider as they plot ways to improve conditions for players in the future.

Until the day arrives when jock taxes are ruled unconstitutional for all states, this tit-for-tat paper shuffling nightmare will continue, and the players who are on the lower end of the NFL pay scale will suffer the greatest burden.  My advice? Find a GOOD tax accountant as soon as you sign an NFL contract to ensure that you are record keeping everything necessary to pay the least tax required. You may be able to deduct moving expenses, house hunting costs, temporary housing costs, meals during travel, and a host of other I-didn’t-know-I-could-deduct-those-costs types of expenses. So if rookies spend it, receipt it.

And rookies should get in the practice of getting and keeping receipts. Keep receipts for everything. Organize those receipts by date and by category.  It could save them thousands of dollars in taxes.