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U.S. Tax and Cross-Border Tax Services for Professional Athletes and Entertainers

Professional athletes and entertainers often have extremely high long term financial goals, that is why they work so hard in mastering their craft. To fulfill an athlete or entertainer’s long term financial goals, many complicated factors need to be taken into consideration often with an eye towards the cumulative North American and global market. U.S. Tax IQ acknowledges these factors and works closely with agents and other trusted advisors of professional athletes, the team management, as well as with professional athletes and entertainers directly on covering their US-Canada cross-border tax compliance challenges. We assist professional athletes and entertainers in all aspects of the rigorous tax compliance requirements that permeate the border by offering wide range of U.S. Cross-Border tax services to fit our clients’ needs. No two athletes or entertainers have the same situation and we pride ourselves in our ability to navigate the complexities of cross border tax to provide quality and affordable service to our clients.  

cross border tax services for athletes and entertainers

Signing Bonuses

For most athletes, bonuses paid to Canadian residents or to non-residents of Canada for work performed in Canada are included in their total employment income and is taxable in that regard.  However, the maximum tax rate is 15%. Similar rules apply to how signing bonuses are taxed in the United States. At the same time, taxation of signing bonuses varies depending on the country of residence of the athlete. The taxation of signing bonuses is a determination that is made based on their residency in Canada, residency in the U.S. or dual-resident status.

Selective Representation

Our team has helped many athletes and entertainers through a variety of tax situations. Below are a selected list of circumstances that we have been involved in:

Developed arguments and a tax filing position for claiming substantial amount of certain tax deductions (missed by previous tax return preparer) for a professional athlete defrauded by their agent.
Structured several investments in US real property, as well as advised on tax-efficient structuring of similar investments.
Advised professional athletes on applicable US cross-border tax consequences and implications arising from a proposed Retirement Compensation Arrangement (RCA), including developing a corresponding tax filing position.
Advised professional athletes on US tax residency (income tax) and domicile (US estate and gift tax) considerations designed to effectively manage the athletes’ US tax exposure.
Advised professional athletes on tax-efficient endorsement income structuring.
Prepared various successful Notice of Objections related to income souring for non-resident athletes, resulting in significant tax savings.

Agent and Legal Fees

Legal and agent fees are often a significant expense for a professional athlete. There are significant planning opportunities that could lead to a substantial tax reduction for some athletes and entertainers.
In Canada, legal fees must meet certain requirements in order to be deductible. In the United States, these fees are typically deductible, with few exceptions. In Canada, agent fees are not deductible. Importantly, they are deductible, as an itemized deduction, in the United States.
Residency planning for professional athletes may be critical, especially when there may be such an opportunity before they established their tax residency in a particular jurisdiction.

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Professional Athletes greatest income earning potential is generally limited to a few years compared to other professions. Although an athlete may reach their earning potential relatively quickly, planning for post athletics life is necessary to support their families and maintain an athletes’ lifestyle. Proper and early retirement planning can assist in an athlete reaching their long term financial goals. An athlete may benefit from a tax-efficient retirement compensation plan to receive optimal financial opportunities after retirement.
Retirement Compensation Arrangements (RCAs) in Canada can be a perfect mechanism for a professional athlete to secure his or her future, once he/she can no longer play in a professional capacity. Planning can also help protect the athlete from potential loss of employment (for example, due to a long-term injury). RCAs are available to both Canadian resident and US resident athletes who play on both sides of the border. RCAs are also a popular planning tool for European players playing in Canada.

Assets Protection Strategies

Many professional athletes receive poor advice on their financial holdings and earning and end up losing a significant amount of their hard-earned money. There are effective strategies that can be implemented to protect an athlete, to minimize potential loss and to help them grow financially.
Asset protection can include a variety of methods, but it is important to assist athletes and their team before these problems arise. Being proactive and setting financial goals can be an easy step towards protection of assets. Once a client understands how they want to be situated in the future, our team can help guide them through the potential pitfalls of having significant wealth. Creditor protection, estate planning and gifting are some of the variety of methods that an athlete can use to help achieve their long-term goals.

Endorsement Income Planning

One of the areas of interest for established professional athletes is the tax-efficient structuring for endorsement income. Our team works alongside agents and financial planners to help clients achieve their financial goals. When an opportunity exists to receive supplemental income, we can assist in planning the most tax efficient methods to receive such income.

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