U.S. Cross-Border Tax Advice, Planning, and Compliance Services for Professional Athletes
In order to fulfill an athlete's long term financial goals, many complicated factors need to be taken into consideration. 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 directly on covering their US/Canada cross-border tax compliance challenges. We assist professional athletes in all aspects of the rigorous tax compliance requirements by offering wide range of U.S. Cross-Border tax services for professional athletes.
Generally, bonuses paid to Canadian residents or to nonresidents of Canada for work performed in Canada are included in an athlete’s total income. 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.
- 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.
Legal and agent fees are often a significant expense for a professional athlete. In Canada, legal fees must meet particular 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.
This is one of the examples when pro-active planning may result in significant tax reduction for some professional athletes. 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.
Proper and early Retirement Compensation Planning is crucial to professional athletes in particular as their careers are comparatively shorter than other careers, especially if they are narrowed down to a few crucial years. This means that a young athlete, especially in her/his peak years, may benefit significantly from a tax-efficient retirement compensation plan in order to receive benefits and receive optimal financial opportunities after retirement.
Retirement Compensation Arrangements (RCAs) in Canada may be a perfect mechanism for a professional athlete to secure his future, once he no longer can play. Such 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.
Many professional athletes end up losing a large amount of their earnings due to poor financial decisions. Effective strategies are crucial and need to be implemented in order to protect an athlete’s assets to allow them to thrive financially. The asset protection may be relevant to professional athletes who may be prey to “gold-diggers.”
Part of asset protection planning may involve cross-border estate and gift tax planning for a professional athlete. The significant challenge in this respect is to gain the athlete’s attention, when they are young and do not want to think about retirement.
It is crucial to develop an asset protection plan ahead of time and as early as possible. Any potential creditor may be an obstacle to implementing a sound asset protection plan, had it been implemented before such creditor appeared.
One of the areas of interest for established professional athletes is the tax-efficient structuring for endorsement income. Depending on the particular facts and circumstances, such planning, while not overly complex, may help a professional athlete achieve his financial goals.
Below are some typical tax forms that are required to be prepared and filed with the respective tax authorities for our clients:
- IRS Form W-7, Application for IRS Individual Taxpayer Identification Number (filed to request an Individual Taxpayer Identification Number (ITIN))
- IRS Form SS-4, Application for Employer Identification Number (filed to request an Employer Identification Number – tax identification number for a foreign or US domestic entity)
- IRS Form W-9, Request for Taxpayer Identification Number and Certification (filed to establish US person status and beneficial ownership of the income derived from the United States)
- IRS Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding (filed to establish non-US person status for an individual, beneficial ownership of the income, and claiming treaty benefits, if applicable with respect to income derived from the United States)
- IRS Form W-8BEN-E, Certificate of Entities Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities) (filed to establish non-US person status for an entity, beneficial ownership of the income, claiming treaty benefits, and determine FATCA (Foreign Account Tax Compliance Act) entity classification for US federal income tax purposes, as well as disclose information on certain US ultimate owners, as applicable)
- IRS Form 1040, U.S. Individual Income Tax Return (filed by US persons, including US citizens, Green card holders and residents)
- IRS Form 1040NR, Nonresident Alien Individual Income Tax Return (filed by non-US persons, for example Canadian-resident athletes with duty days in the United States)
- IRS Form 8833, Treaty-Based Return Position (filed to claim benefits of the Canada-US income tax treaty or other applicable US income tax treaty)
- IRS Form 8840, Closer Connection Exception Statement for Aliens (filed to claim closer connection to Canada or other relevant foreign country)
- IRS Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations (filed by US persons with ownership in foreign corporations)
- IRS Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund (filed by US shareholders of certain passive entities, Passive Foreign Investment Companies (PFICs), when a Qualified Electing Fund (QEF) election or Mark-to-Market election is made; typically filed for direct investments by US persons in foreign mutual funds)
- Form 8938, Statement of Foreign Financial Assets (filed by US persons with foreign financial assets, provided certain thresholds are met)
- IRS Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner (filed by certain foreign trusts)
- IRS Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts (filed by certain US persons receiving distributions from foreign trusts or certain gifts from nonresident alien individuals or foreign entities)
- IRS Form 8288, U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests (filed to apply for IRS withholding certificate to reduce FIRPTA (Foreign Investment in Real Property Tax Act) withholding on a sale of US real property. Transaction-based filing.
- IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return (filed by deceased U.S. person to report fair market value of worldwide estate in excess of estate tax exemption)
- IRS Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return, (filed by a deceased non-U.S. person to report U.S. situs assets in excess of estate tax exemption)
These forms vary by state and locality where a professional athlete provided services (played a game) and/or were or deemed to be a resident. U.S. Tax IQ can provide a state tax rate matrix to assist clients in making potential team decisions.
FinCen 114 (Foreign Bank Account Reporting (FBAR)) (filed by US persons with foreign bank accounts and assets, including Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs), provided certain threshold is met)
- T1 General, Income Tax and Benefit Return (filed by Canadian-resident athletes)
- T1 General, Income Tax and Benefit Return (Non-resident) (filed by Canadian non-resident athletes)
- T1159, Income Tax Return for Electing Under Section 216 (filed by Canadian non-resident athletes that have a rental property located in Canada)
- T1135, Foreign Income Verification Statement (filed by Canadian resident athletes that own foreign property in excess of a threshold)
- R105 E, Regulation 105 Waiver Application (filed by a non-resident performing services in Canada, to reduce or eliminate Canadian withholding tax)
Only Quebec has a separate provincial tax filing requirement.
Why U.S. Tax IQ?
We are available 24/7 to our clients
Our clients can reach us 24/7, day or night. We also respond to our clients’ inquiries within 24 hours, no exceptions.
We do more than tax compliance
We continually review our clients’ situations to identify and develop tax planning opportunities to further help minimize the tax compliance burden and to effectively manage potential tax exposure.
The right expertise
Our team of qualified tax advisors, who include CPAs and a US tax lawyer, have relevant academic background and relevant experience to provide high quality, timely, and practical advice to professional athletes.
The right fit
We have passion for what we do and we share the same passion for tax as professional athletes do for their trade. We volunteer in and sponsor local sports teams and are actively involved in the hockey community. We help out the rising stars, understanding that they need a boost before they start making significant money.
We pride ourselves on investing in and maintaining resources and practice tools to keep up-to-date with the most recent tax developments and industry trends. We actively participate in professional organizations and attend tax conferences to stay in touch with reality
We charge fair professional fees
Our approach to assisting professional athletes is based on the time we spend on a matter, not on a “celebrity factor.” As much as we would love to charge superstars super dollars, we believe in professionalism and high integrity of our team.
Are you an agent working with professional athletes and need comprehensive and fast consultation? We can save your time and your client's money.
“Brandon and Alex exhibit true professionalism and creativity in everything they do. They have the same passion for tax that hockey players have for the game of hockey. We enjoy working with them as they provide real value to our clients.”
Stew Gavin, CFP
President, Gavin Management Group (former NHL player)
"U.S. Tax IQ helped me save on my taxes and guided me through a complex net of cross-border tax. Brandon and Alex are true hockey fans and I enjoy working with them.”
Former NHL player
“Alex and Brandon consistently show their ability to resolve the most complex cross-border and U.S. tax issues for my clients. They are my trusted source for U.S. tax advice and compliance.” William Johnston, Tax Lawyer, Ottawa.
Tax Lawyer, Ottawa