Tax Information

Tax Information

I have always counseled each of you regarding the importance of consulting a professional regarding tax issues. As a result of several recent inquiries I wanted to resend part of an earlier email regarding paying taxes on overseas income. First, I want to alert you to an issue regarding overseas bank accounts

Overseas Bank Accounts

Federal income tax form 1040, schedule B, lines 7a and 7b, pertain to “foreign accounts and trusts.” This section requires you to disclose that you had a foreign bank account at any time during the year unless the combined value of all foreign accounts was $10,000. This has practical applications: (1) The above is another of the many reasons why we need to ensure the GREAT bulk of your overseas income is wired directly to an account in the US; and (2) we will have to ensure that whoever completes your taxes understands that there must be a disclosure if you have such an overseas account(s).

Taxes on Overseas Income

As to taxes on overseas income in general, very few athletes understand the requirements for paying taxes in the US. I would never claim to be a CPA, but want to provide a very short ad general overview based on input from professionals I trust.
The United States has a tax agreement with almost every country in the world to protect against double taxation. This means that if your team is paying tax on your salary, you will not be obligated to pay taxes on the same salary in the US up to the percentage of taxes you (the team) paid in the country where you played. For example:

If you make $100,000 playing in Italy and the club you play on pays 20% taxes on your salary in your name, then $20,000 in taxes was paid in your name. When you get back to the US and declare to the IRS that you made $100,000 in Italy, your tax obligation here will be calculated using various factors - such as total salary, dependents, deductions, etc. If your calculated rate in the US was 25%, that would mean a tax of $25,000. As a result of $20,000 in taxes already being paid in your name by the Italian team, your tax liability in the USA should only be the difference between $25,000 and $20,000 = $5,000. As a result, you would owe $5,000 to the IRS on the total income you earned overseas. PLEASE make sure that we address any questions you have regarding overseas income.