You’re a student athlete, making good NIL dollars and you’re only paying taxes in April. I’m afraid you’re doing it wrong. (This doesn’t just apply to student athletes. ALL ATHLETES, self employed people, I’m talking to you!)
When you earn NIL income, the government basically expects you to “pay as you go”. It’s called ESTIMATED TAX PAYMENTS. Tax payments that are owed to the government, QUARTERLY, if the student-athlete anticipates owning at least $1,000 in taxes for the year. And if you don’t, penalties and interest, a bigger tax bill!
Athletes, this is what you should be aware of:
Quarterly Payments – if you expect to owe more than $1,000 in taxes, you should be making estimated payments. No exceptions. April, June, September, January (yes in that order)!
Self-employment and income tax – these payments are covering both these taxes. Self-employment tax is wild!
Non Cash Compensation/Free stuff – you need to consider these things as well. Remember free ain’t free (see last post). They’re taxing the fair market value.
Form 1040-ES – it’s a different form than the 1040 you also have to fill out. This form is used to calculate and submit your estimated payment.
General rule of thumb: Set aside 20-30% of income for taxes. Easier said than done, I know, I was a student-athlete once!
