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Unique Factors in the State Taxation of Professional Athletes
 
In 1994, the Federation of Tax Administrator’s (FTA) Task Force on Nonresident Income Tax Issues submitted its report on the State Income Taxation of Nonresident Professional Team Athletes. The Tax Force determined that the adoption of a uniform method of allocating the income of team members was in the best interests of, mainly, state administrators and teams. Under this formula, a team member’s income is allocated based on the proportion of duty days spent in the state (and city, if applicable) as compared to all duty days, normally from pre-season training through the end of the season or the playoffs, if the team participates in the playoffs.
 
These rules apply to team members and other persons traveling with and performing services on behalf of the team, including coaches, managers and trainers. These rules apply to professional baseball, football, basketball and hockey teams.
 
Income subject to apportionment includes all compensation paid to the individual for the performance of services for the team, except that “signing bonuses” are not subject to allocation if they meet certain conditions. A signing bonus is allocated and is generally taxed to the athlete’s state of residence.
 
State Income Allocation
 
Even when state laws require that a team member’s income be allocated based on the total of duty days (from pre-season training through the end of the playoffs) most professional baseball teams prepare the Form W-2 based on 183 days, which is the championship season, as named in the collective bargaining agreement. Sueiras & Amador, as income tax preparers, attach an income allocation calculation to the income tax return of each client-player, increasing the total number of duty days from 183 days to the number of days that will include the pre-season training days through either the end of the season or playoffs. Sueiras & Amador also determine the number of days that each client-player plays in each city/state, since the teams normally do not provide that information.
 
By revising the income allocations used by the teams in their preparation of the Form W-2, Sueiras & Amador normally saves their client-players thousands of dollars annually by reducing their state income taxes.
 
State of Residence
 
It is important for an athlete to properly document his state of residence in order to minimize state tax liabilities. If a player’s domicile is in a non-tax state like Florida, Texas, Washington it could have a big impact on the overall state tax implications. An athlete’s state of residency is determined on the particular facts and circumstances. A resident is anyone who establishes themselves in a place for other than temporary, special or limited purposes, but with the intention of making it a fixed and permanent home.
 
The following are factors used to determine residency:
 
Driver’s license address.
State registered to vote.
Passport address.
 
State where a taxpayer has membership in country club, health clubs, gyms. Whether a taxpayer has a resident vs non-resident membership in a country club would have an impact in the determination of residency.
 
Serving in jury duty at a particular location
Automobile registration
AAA membership
Address in a will
Listing in a city phone book, if applicable
Address in national organizations (MLBPA)
Address in baseball contracts
Address of doctors seen on a regular basis (family doctor,
  dentist, etc)
Homestead exemption
Church membership
School enrollment
Location of professional advisors (attorneys, accountants,
  financial)
 
This is not a complete list of factors; these and other factors may affect the determination of your state of residence. If you have any questions about establishing your residency, please contact us at 305-279-7655.
 
Our Services
 
For the professional athletes, we prepare all applicable state and local income tax returns, besides the federal tax return and other services rendered to all clients. Our strategy is to comply with all applicable state and local laws.
 
The most unique components of a professional athlete’s state and local income tax returns are:
 
Preparation of “duty day” schedule as described under the
  “State  Income Allocation” section.
Determination of all jurisdictions in which a tax return is
  required  to  be filed taking into account reciprocal
  agreements,  de minimis filing requirements and non-taxing
  jurisdictions.
Proper allocation of income to each applicable jurisdiction,
  including a duty day statement specifying the allocation
  formula.
Proper treatment of signing bonuses when allocation is
  applicable.
Determination of applicable business deductions. Assisting in
  establishing state residency.
For additional information, please contact us at 305-279-7655
Sueiras & Amador
9495 Sunset Drive
Suite B-230
Miami, FL 33173
305-279-7655
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