FIL­ING FOR TOUR PROS

Golf Digest (South Africa) - - The Golf Life -

Tour pros have it tough at tax time. Well, their tax pre­par­ers do, any­way.

PGA Tour pros com­pete for prize money in mul­ti­ple Amer­i­can states, and those states ex­pect to take their cut in taxes. This means that, in ad­di­tion to their fed­eral 1040s, play­ers are sup­posed to file tax re­turns in each state where they play.

Most states these days make tour­na­ments with­hold state taxes from play­ers’ win­nings, says Jim Palsa, a CPA who han­dles taxes for a PGA Tour pro­fes­sional. Palsa gets a no­tice from the PGA Tour every month telling him how much the player made, and where.

Could he maybe just . . . for­get to file those state re­turns? “Our feel­ing has al­ways been to file ev­ery­where,” Palsa says. “If you don’t file in a state, there’s no statute of lim­i­ta­tions. Then you’re look­ing at in­ter­est and penal­ties.”

Some states have been com­ing af­ter play­ers’ en­dorse­ment in­come, too. Let’s say you had $1 mil­lion in en­dorse­ment con­tracts and spent 10 per­cent of your days this year in Cal­i­for­nia. The state would ex­pect you to pay in­come tax on 10 per­cent of that $1 mil­lion.

For a closer look at the tax re­turn of a typ­i­cal PGA Tour player, we con­sulted Florida-based Art Hur­ley, who spe­cialises in pro­fes­sional ath­letes and en­ter­tain­ers. Hur­ley ran the num­bers for us on a hy­po­thet­i­cal player who earned $1.37 mil­lion in tour­na­ment purses last year and $450 000 in en­dorse­ment in­come. This player com­peted in 29 events in 17 states, plus Puerto Rico, Mex­ico and Canada. Hur­ley cal­cu­lated ex­penses of about $760 000, in­clud­ing agents, cad­dies, trans­porta­tion, lodg­ing, meals, swing coach and a per­sonal trainer.

This data is based on the 2015-’16 sea­son of Pa­trick Rodgers, whose win­nings were close to the me­dian fig­ure on the PGA Tour last sea­son. Note that these aren’t Rodgers’ ac­tual ex­penses, so we can’t be sure they re­flect his true tax sit­u­a­tion. But they show how it works.

How much did our hy­po­thet­i­cal player owe in taxes? Just un­der $457 000, mean­ing – bot­tom line – his bank ac­count was $597 000 larger at the end of the year. No ques­tion, that’s a lot of money by nearly any­one’s stan­dards. But con­sider that it rep­re­sents just 33 per­cent of our player’s $1.82 mil­lion gross in­come and 56 per­cent of his net in­come af­ter ex­penses.

Some other high­lights from Hur­ley’s num­ber-crunching:

▶ Our player’s big­gest tax bill came from the IRS ($385 000).

▶ He earned his largest pay­day in Con­necti­cut ($391 000), and it cost him. He owed the state around $17 700 in in­come tax on his win­nings and an­other $430 in in­come tax on his en­dorse­ments.

▶ Florida took no such bite from his $142 000 in tour­na­ment earn­ings there, be­cause it has no state in­come tax. But it saved him most on his en­dorse­ment in­come. As a Florida res­i­dent, he was in the state 213 days dur­ing the year, or 58 per­cent of the time, mean­ing that 58 per­cent of his $450 000 en­dorse­ment in­come was not sub­ject to state in­come tax.

▶ His high­est tax rate was in Mex­ico, where the $92 000 he net­ted (on a $146 000 tour­na­ment prize) at a PGA Tour event was taxed at a to­tal of al­most 31 per­cent.

▶ There were four states (Alabama, New York, North Carolina and Ohio) where he com­peted and missed the cut. Those states can tax a per­cent­age of his en­dorse­ment in­come based on the num­ber of days he was there. But be­cause of his ex­penses, he was able to show a net loss in those states, mean­ing he owed no state in­come tax in any of them.

Keep in mind, states with low taxes of­ten have higher-thanaver­age hous­ing and med­i­cal costs.

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