You’re facing some big financial decisions and filing taxes needs to be a priority. Some American athletes are playing a dangerous game with the Internal Revenue Service (IRS) by not complying with U.S. tax laws. Others are passing up valuable opportunities to receive refunds from their host countries.
As Americans, no matter where we earn money, we are required to report our worldwide income on our U.S. income tax returns. Additionally, the U.S. Department of Treasury requires Americans to report their foreign bank accounts. Failure to do so can result in fines as much as half the account value.
Certified Public Accountants (CPAs) who are fluent with the international aspects of the tax code can help you navigate the complex rules. They also understand the provisions in the U.S. tax code which provide relief from double taxation for international athletes.
Here are a few tips we give our international basketball clients:
1. Make sure you obtain official foreign earnings statements and paystubs from your team. These forms show what you earned and how much foreign taxes were paid on your behalf (equivalent to U.S. Form W-2). For example, BEFORE you come home after the 2016-17 season, make sure your team provides you with your 2016 annual wage and tax statement. These are usually available by the end of January. For the months played in 2017, be sure to have your last paystub, showing what you earned thus far as well as the taxes paid year-to-date. In early 2018, obtain your 2017 official foreign earnings statement for that part of the season. Always keep each of your paystubs to prove what you earned and the taxes paid.
2. Retain a copy of all your overseas playing contracts. These contracts supplement your wage statements and help to detail what you were supposed to get paid in the respective calendar years.
3. Keep a copy of all receipts for any basketball-related expenses that you incur. This includes things like agent fees, training expenses, sports equipment, and travel costs that you incur as a professional athlete. We provide our clients with a questionnaire that reminds them what expenses are possibly deductible; however, it is easier to track these expenses as they incur during the year, as opposed to having to scour bank and credit card statements to try to identify deductions.
Remember that paying taxes is an obligation of every American. Failing to declare what you earned to the IRS is a form of tax evasion. The penalties can be quite severe, including jail time and hefty fines. Make sure you are in the headlines for your successes on the court and not for being a victim of the IRS global crackdown on people who hide their offshore income or accounts.
For more information or to speak with an experienced tax professional knowledgeable about international taxes for overseas pros, please call us at (804) 557-2648, e-mail TaxPro@ProSportCPA.com, or visit www.ProSportCPA.com. ProSport CPA is the leading tax firm exclusively for professional athletes, serving more than 150 professional basketball players. Good luck with your pro career!