It’s amazing to watch the Olympic athletes compete in the London Games. Especially gratifying is getting to see their hard work and talents result in the ultimate prize: an Olympic medal. However ,for many of the Team U.S.A. medal winners, this reward can also mean tax debt to the IRS if prize money is not properly reported.
A Huffington Post article titled Olympians Could Owe The IRS Thousands In Taxes On Medals, Cash Bonuses highlights the fact that the better athletes do, the more taxes they owe to the IRS. Makes sense….
According to the article (and what some athletes may not know) medals and prize money are subject to income tax similar to game show or lottery winnings. Using a 35% tax rate, the Americans for Tax Reform calculated a gold medal winner will have IRS tax debt of at least $8,750. Here’s how:
- The value of the gold medal is $650. Athlete’s tax liability for the medal itself: $236.
- The U.S. Olympic Organizing Committee award for a gold medal = $25,000
Athletes racking up the gold medals will presumably be taking home sponsorship deals and owe the IRS a whole lot more in earnings. It’s estimated that swimmer Ryan Lochte could earn over $2 million dollars from his performance in London, picking up where retiring teammate Michael Phelps left off.
Congress is weighing in on this tax issue. This week, Senator Marco Rubio (R- Fla.) introduced a bill to Congress that would bring IRS tax relief to the London Olympic athletes by exempting them from paying taxes to the IRS on their winnings. This measure provides tax help by insisting that those who earned their Olympic medals aren’t required to pay for them.
When earnings increase, so do taxes. Hire an expert professional to navigate the IRS waters.
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