As a gamer competing in eSports, you’re facing some big financial decisions and filing taxes needs to be a high priority. Some pro gamers are taking too many chances with the Internal Revenue Service (IRS) by not complying with U.S. tax laws. Different countries have different rules regarding income that must be declared. Americans, no matter where they earn their money, are required to report worldwide income on their U.S. income tax returns.
Internationals competing in the U.S. must also abide by U.S. tax laws and may be taxed on their worldwide income or U.S.-only income, depending on the circumstances. Various states and cities in the U.S. also have unique tax and reporting requirements. Additionally, disclosure of foreign bank accounts to the U.S. Department of Treasury may be mandatory. Failure to do so can result in steep fines.
Certified Public Accountants (CPAs) who are fluent with the international aspects of the U.S. 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 pro gamers.
Here are a few tax tips for gamers to keep in mind:
Take advantage of alternative business structures to significantly cut your tax bill. For gamers who earn $10,000 or more of net business income per month, tax-advantaged strategies can be implemented to save over $12,000 per year (in taxes, net of all fees). The more a gamer earns, the greater the immediate tax savings can be. Plus, sizable retirement savings can be accumulated in a short period of time.
You can save tax money by keeping good records for all gaming-related expenses and your days in and out of the U.S. These include expenses such as agent fees, computer equipment, software, visa/legal fees, and travel costs that you incur as a pro gamer. We provide our clients with a questionnaire to identify expenses which are potentially deductible. Tracking U.S. and foreign travel days is also a factor for determining how gamers are treated in the eyes of the U.S. and foreign tax authorities.
All income is not treated equally. Gamers may receive income in a variety of ways, such as salaries from teams, streaming fees, endorsement income, revenue share on in-game items, stream donations, tournament prizes, and coaching sessions. Tax rates and deductions vary based on the type of income. Employers are required to withhold income taxes on your salaries as an employee. However, those other types of income may not have any taxes withheld on them, so you are responsible for paying the taxes.
Retain the services of tax consultants who are experts in serving pros. You want to make sure you are paying the lowest, legal amount of taxes possible. Gamers are allotted special tax deductions based on their profession. You should retain a CPA firm that is experienced, that charges reasonable rates, and that understands how to optimize all the tax deductions available to you as a pro gamer.
Remember that paying taxes is an obligation of every U.S. citizen, resident, and visitor who earns money in the U.S. Failing to declare what you earn to the IRS is a form of tax evasion. The penalties can be severe, including jail time and hefty fines. An experienced CPA can help you avoid those penalties.
For more information or to speak with an experienced tax professional knowledgeable about international taxes for gamers, please call us at (804) 557-2648, email TaxPro@ProSportCPA.com, or visit www.ProSportCPA.com. ProSport CPA is the leading tax firm in professional sports, serving more than 500 clients in all the major sports leagues. Good luck in your professional career!