Navigating Taxes as a College Athlete: W-2 and 1099 Forms Explained

August 17, 2023

Written by: Ashley Alford

As a college athlete, you’re juggling numerous responsibilities, and understanding the tax implications of your activities is crucial. Two forms that hold significant importance are the W-2 and the 1099. Let’s delve into the details of these forms, particularly focusing on the 1099 form and its relevance to athletes engaged in Name, Image, and Likeness (NIL) deals.

The W-2 Form: A Brief Overview

The W-2 form, often known as the Wage and Tax Statement, is a document that employers provide to their employees. It summarizes your earnings and tax withholdings over the tax year. The W-2 form includes essential details such as total wages earned, federal and state income tax withheld, Social Security and Medicare taxes paid, and more. Employers are required to furnish employees with the W-2 form by the end of January following the tax year.

Part-Time Jobs and Tax Reporting

If you’re a college athlete with a part-time job or compensation from work unrelated to your athletic scholarship, this income should be reported as taxable wages. The employer will issue you a W-2 form, which you’ll use to accurately report your earnings and taxes withheld on your federal and state tax returns. Ensuring the accuracy of your W-2 form is vital, as it directly impacts your tax liability, eligibility for tax credits, and potential refunds.

Enter the 1099 Form: What It Means for Athletes

The 1099 form is part of a series of “information returns” used to report various types of income beyond regular wages. Athletes engaging in NIL deals often encounter the 1099-MISC form, which reports miscellaneous income. The significance lies in the fact that when you participate in an NIL opportunity, you’re acting as an independent contractor rather than an employee. As a result, the business or entity you work with will issue you a 1099-MISC to report the income earned from the engagement. The vast majority of NIL deals treat student-athletes as 1099 contractors. 

Tax Implications for 1099 Contractors

Being treated as a 1099 contractor has distinct tax implications:

  • Self-Employment Taxes: Unlike traditional employees, 1099 contractors are responsible for both the employee and employer portions of Social Security and Medicare taxes, known as self-employment tax.
  • Estimated Tax Payments: With no taxes withheld from your income, making estimated tax payments throughout the year becomes crucial to cover your tax obligations and avoid penalties.
  • Record Keeping: Keeping meticulous records of your contracted work income and related expenses is vital for accurate reporting and claiming deductions.

Reporting and Filing

When you receive a Form 1099-MISC, the reported income must be included in your tax return. It’s reported on Schedule C of Form 1040, which calculates your net income as a self-employed individual. This net income determines your tax liability.

Professional Guidance is Key

Understanding W-2 and 1099 forms can be intricate, especially when navigating the world of self-employment taxes as a college athlete. Consulting a tax professional is recommended to ensure compliance with IRS regulations and make informed financial decisions.

In summary, grasping the dynamics of W-2 and 1099 forms is essential for college athletes. While the W-2 reflects your part-time job earnings, the 1099 unveils the complexities of independent contracting, particularly relevant in the realm of NIL deals. By staying informed and seeking professional guidance, you’ll confidently navigate the tax landscape and set a solid foundation for your financial well-being.