When student-athletes begin earning income from Name, Image, and Likeness (NIL) activities, it’s important for them to be aware of various IRS forms that may apply to their situation. Here’s a list of key IRS forms that student-athletes should consider:
1. Form W-9: Request for Taxpayer Identification Number and Certification
- Purpose: Used to provide your Taxpayer Identification Number (TIN) to those who will pay you. This form is often required by companies before they make payments to you for NIL activities.
2. Form 1099-MISC: Miscellaneous Income
- Purpose: Issued by companies that pay you $600 or more in a year for services related to NIL activities. This form reports the income to the IRS, and you’ll need to report this income on your tax return.
3. Form 1040: U.S. Individual Income Tax Return
- Purpose: This is the standard form used by individuals to file their annual income tax returns. Student-athletes will report their total income, including NIL income, on this form.
4. Schedule C (Form 1040): Profit or Loss from Business
- Purpose: If you are considered self-employed (which may apply to many student-athletes earning NIL income), you’ll use this form to report income and expenses related to your NIL activities. This allows you to deduct any business expenses incurred.
5. Schedule SE (Form 1040): Self-Employment Tax
- Purpose: If you have net earnings of $400 or more from self-employment (including NIL income), you’ll need to complete this schedule to calculate and report your self-employment tax.
6. Form 8862: Information to Claim Earned Income Credit After Disallowance
- Purpose: If you had the Earned Income Tax Credit (EITC) denied in a prior year, this form is used to reapply for the credit in a future tax year.
7. Form 8889: Health Savings Accounts (HSAs)
- Purpose: If you have a Health Savings Account and wish to make contributions or distributions, you’ll need this form to report those amounts on your tax return.
8. Form 4562: Depreciation and Amortization
- Purpose: If you purchase assets for your NIL activities (like equipment or supplies) and plan to depreciate those costs over time, you will need to complete this form.
9. Form 5329: Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
- Purpose: If you need to report additional taxes on tax-favored accounts, including HSAs or other retirement accounts.
10. Form 990-EZ: Short Form Return of Organization Exempt from Income Tax
- Purpose: If you form a nonprofit or charitable organization to manage your NIL activities, this form may be relevant.
Important Considerations
- Keep Records: Maintain detailed records of all income earned and expenses incurred related to NIL activities. This documentation will help when filing taxes.
- Seek Professional Advice: Consult with a tax professional or financial advisor familiar with NIL income to ensure compliance with all tax laws and regulations.
By understanding these forms and their purposes, student-athletes can better navigate their tax responsibilities as they engage in NIL opportunities.