Orange County California CPA Firm

Why Taxes for Professional Athletes Are Complicated

The only two things in life that are certain, as they saying goes, are death and taxes. The problem is, taxes have become quite complex, especially for pro athletes and other professionals who travel to certain cities, states, and even foreign countries for the purpose of business.
Pro SportsIn the case of professional athletes, the business is the sport in question. Football teams travel for at least eight games in a typical season. NBA teams play more often and travel to other states more frequently during their seasons, as do NHL players who have the added burden of traveling to Canada for several games during their season too.
What this all means for taxes, is that it’s really complicated! Here’s why.
State and City Taxes
Many cities, especially those hosting facilities that bring in professional sports games, have adopted special city taxes to impose on professional athletes in order to help offset the costs of their sports facilities. It’s an ingenious method, on behalf of the cities, to bring in tax revenue, without involving their constituents.

State income taxes are a given in most states, and is something players are expected to pay in every state in which they play in a given year and for every game they play in each state.
Complicated Formulas
Face it, few athletes are mathematical geniuses. They may have more than a little skill when it comes to reciting states, but complicated accounting formulas are often a little outside their wheelhouses. They have better things to do with their brain power, after all, like devoting themselves to improving their games.
Unfortunately, the formulas are so complex that only an accountant could possibly love them, oh and city and state bean counters who can’t wait from the dollars to roll on in from the 53 players on the rosters of at least eight different NFL teams each year.
Don’t forget the tax revenue for trainers, coaches, equipment managers, officials, and more that travel with these teams as they take their games on the road. Other sports have even more games in other cities throughout the season raising the stakes even higher for host cities and states.
Mitigating the Costs of Doing Business Across State Lines
There are things players can do to help relieve some of their excessive tax burdens, otherwise known as the “jock tax.” They aren’t big bold moves, but they can save a great deal of money in taxes each year for players that take advantage of them.
Establish Permanent Residence in States that do not Tax Income
This will not eliminate all your tax burden, but it will go a long way towards relieving some of the burden to give athletes extra breathing room. Popular states for consideration are Florida, Texas, Nevada, and Wyoming.
Take Advantage of Available Deductions
They exist to help relieve tax burdens. Use them for that purpose. This is especially true of expenses related to training camp, like the following:
• Hotels
• Apartments
• Meals
• Rental Cars
Finally, and perhaps most importantly, seek tax help from qualified professionals. Rules and exceptions get trickier by the year. Tax professionals are trained to deal with tricky situations. Let them do the heavy lifting for you so you can focus your attention on pursuits that are far more profitable for you.

If you are looking for a CPA Firm to lower your tax liability legally, call 949-759-5626 and ask for Jerry Morey.

Our firm services businesses and high net worth individuals throughout Orange County.  We have offices in Newport Beach and San Clemente.

Home Office Tax Rules

Home OfficeThere was a time that determining the correct deductions for your home office was complicated and could lead directly to an audit. Luckily, those days are in the past. The IRS no longer considers a home office a red flag, and they have found ways to simplify the process of taking this deduction.

Before 2013, business owners that worked out of their home were required to determine the actual expenses of their home office. This could include items such as utilities, insurance, and mortgage interest. The amount that could be deducted as a business expense was determined by the percentage, of the total square footage of your home, that was used for office space, but in 2013 that all changed.

For taxable years of 2013 and beyond, the IRS has introduced a simplified option. This allows business owners to multiply a prescribed rate by the square footage of the home that is being used as office space to determine the allowable deduction.

This change permits business owners to reduce the need for recordkeeping as actual expenses no longer need to be tracked.

There are two requirements that a business owner needs to meet to be eligible for the home office tax deduction. First, the area of your home that is used for your office must be used exclusively for conducting business. That means a kitchen table is not a home office, but if you have a room in your home that you use for office space exclusively, that would qualify.

Secondly, your home office must be your principal place of business. That doesn’t mean you can’t have an office elsewhere, but you need to be using your home office for meetings with clients, or some other activity that would suggest it is not simply an area that you work in from time-to-time.

If you have a home office, don’t hesitate to take the deduction you are entitled to. With the simplified option to determine your deduction, this is one time the IRS has made it too easy to pass up.

Morey and Associates CPA is a Orange County CPA Firm with offices in Newport Beach and San Clemente.  Our services are designed to minimize your tax liability within the legal limits for business owners and high networth individuals.  If you would like help lowering your tax liabilty, call us at 949-759-5626 and ask for Jerry Morey.