Professional Athletes with Tax Problems

Over the past week two professional athletes have had their IRS tax problems splashed across the headlines. First on the list is professional golfer Jim Thorpe, who has pleaded guilty to failing avoiding over $2 million in federal income taxes.

According to the Associated Press, Thorpe was charged in February with seven counts of failing to pay federal taxes on income he earned in 2002, 2003 and 2004. He will face a maximum of two years in prison and a $4.1 million fine when sentenced.

The other was famed boxer Floyd Mayweather Jr. who recently agreed to pay $5.6 million in back taxes after the IRS threatened to take the money from winnings that resulted from his victory Juan Manuel Marquez. Check out the following article on Mayweather’s tax problems from Google News.

The IRS sent the Nevada Athletic Commission a levy notice on Sept. 4 ordering Mayweather's unpaid taxes from 2007 to be deducted from his $10 million fight purse, commission executive director Keith Kizer told The Associated Press.

Kizer said the IRS backed off one week later, after Mayweather agreed to pay the money. Mayweather won the fight in a unanimous decision.

Mayweather's tax attorney, Jeffrey Morse, told the AP on Tuesday that federal officials never intended to take Mayweather's purse, and the five-division champion has satisfied all his IRS debts.

"Floyd has — and I will absolutely attest to it — more than satisfied every tax obligation that he has," Morse said. "As of today, as of some time ago, which I can't tell you when, he owes zero to the IRS."

State Taxation of Professional Athletes

Earlier today, I saw this interesting entry on the Tax Professor Blog that immediately caught my attention. The article by Alan Pogroszewski takes an in-depth look at the tax issues professional athletes face in different states. I’ve included a quote from the introduction below, but you can find the full article including a helpful graph, at Tax Prof Blog.

“This article will begin with a historical look at the states’ ability to tax both their resident and those nonresidents who earn income within their borders by reviewing the Supreme Court’s interpretation whether this is within the state’s constitutional power. This will be followed by an examination on how individual states came to determine the apportionment of income of a nonresident. This section reviews the individual state court decisions that define the tax implications to off season training, spring training the post season, and the allocation of athletes playing and signing bonus for a nonresident athlete. The article then examines the practical application of this tax in whether or not states increase their overall income tax revenue by this practice. Research in this section indicates that they in fact do. The article then concludes with the practical consequences on how these laws affect individual athletes. This Article concludes with the fact that there may be at least one reason why you may want to sign a free agent client with the Tampa Bay Rays rather than with the San Diego Padres.”

To learn more about athletes who have had tax issues, check out this entry I posted to my blog a few months titled “10 Professional Athletes that had IRS Tax Problems.”