Playing all over the country means that basketball players and other sports stars need to file in multiple states. Enter: ProSport CPA.
Doing your taxes is frustrating, but doing your taxes when you’re accumulating paystubs in a variety of states, precincts, and countries can make an annoying process downright draconian. Uncle Sam might not ask for anything more than a W-2 from Americans who only work for one company, but pro athletes rarely have that luxury. John Karaffa saw this firsthand when he played professional basketball overseas for 12 seasons. Between federal demands, regional idiosyncrasies, and international inconsistencies, sometimes an athlete’s tax return can be hundreds of pages deep.
So, in 2009, Karaffa started ProSport CPA, an accounting firm that offers tax services and financial planning to athletes all over the world. Today, he says the company works with almost 1,000 clients, including pros in every major sports league in America and the rest of the world. Karaffa explains that ProSport understands the tax situations athletes might come across in the murky waters of contracts, royalties, and endorsement income. But more than that, he hopes to be a steadying presence in an industry that eats its young. (For example, Karaffa advises against opening a restaurant while you’re on your first contract.)
A major part of Karaffa’s business is the so-called “jock tax.” During the 1991 NBA Finals, California instituted a tax on the money that Chicago Bulls players earned while they were in the state to play the Los Angeles Lakers. This created a snowball effect, and today nearly every state — except for Florida, Washington, Texas, and Washington, DC — enforces a tax on visiting players. Over the course of an NBA season, a player might visit 20 different states, which means that they’ll need to file returns in each of them. That is a difficult thing to accomplish without the help of a company like ProSport, which has a deep understanding of every state’s tax code. We talked about that, as well as how ProSport recruits new clients, and the rude awakening young players often have when the taxman comes knocking in April.
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