The NIL marketplace is still in its early stages and is largely unregulated, much like the Wild West. However, as things begin to settle down, it’s clear that Uncle Sam will want his share of the pie. One source close to the NIL market has pointed out that unpaid taxes are likely to become a significant issue for athletes receiving name, image, and likeness payments.
Many young athletes are receiving money through NIL deals but are spending it without setting aside any funds for taxes. Federal laws apply universally, and tax rates vary by state. For example, the current federal tax rate for a $1 million payment is 37%, meaning $370,000 will need to be paid to the federal government by April 15, 2025.
Unlike traditional income where taxes are automatically withheld, NIL payments do not have taxes taken out. This means that young athletes who may have little to no experience with taxes will need to navigate this on their own. If they fail to do so, they could face serious consequences from the IRS in the future.
The source stresses that this issue is already arising and will likely continue to be a problem because many athletes are not receiving the necessary information in a timely manner. Failure to address tax obligations could result in a substantial tax bill down the line. While NFL players may have the means to rectify these tax issues later on, athletes who do not make it to that level could face significant financial troubles as a result.
In conclusion, while the NIL marketplace is still in its early stages and largely unregulated like the Wild West, it’s clear that Uncle Sam will want his share of the pie soon enough. Young athletes who receive NIL payments need to understand their tax obligations and set aside funds accordingly or risk facing serious consequences from the IRS in the future.
