Go for the Gold! (Pay the IRS.)

[PorkChopSandwiches]

Because conservatives are scrooges, the good folks at Americans for Tax Reform have gone through the fine print to find out what our Olympians will have to cough up to the IRS should they be lucky enough to win any medals in London.


http://www.thejayfk.com/wp-content/uploads/2011/01/WTF.jpg

Even by the standards of our government, the numbers are insane.

For instance: Americans who win bronze will pay a $2 tax on the medal itself. But the bronze comes with a modest prize—$10,000 as an honorarium for devoting your entire life to being the third best athlete on the planet in your chosen discipline. And the IRS will take $3,500 of that, thank you very much.

There are also prizes that accompany each medal: $25,000 for gold, $15,000 for silver, and $10,000 for bronze.

Silver medalists will owe $5,385. You win a gold? Timothy Geithner will be standing there with his hand out for $8,986.

So as of this writing, swimmer Missy Franklin—who's a high school student—is already on the hook for almost $14,000. By the time she's done in the pool, her tab could be much higher. (That is, unless she has to decline the prize money to placate the NCAA—the only organization in America whose nuttiness rivals the IRS.)

ATR notes that the real twist of the knife is that most other Olympians won't pay any taxes on their medals because America is one of only a handful of countries which taxes "worldwide" prize income earned overseas.

[Teh One Who Knocks]

It's income :dunno:

[Southern Belle]

The IRS sucks. Wish we could do away with it.

[Hal-9000]

No way...I thought it bad that you were taxed on a state lottery (that already makes a hefty profit thank you very much)


they tax medal earnings too?????? Holy Thievery :lol:

[FBD]

35%???? ffs.

[PorkChopSandwiches]

It's income :dunno:

swimmer Missy Franklin—who's a high school student—is already on the hook for almost $14,000.


:lol: craziness

[Teh One Who Knocks]

swimmer Missy Franklin—who's a high school student—is already on the hook for almost $14,000.


:lol: craziness

It doesn't matter how old she is, income is income...if she earned that money at a job or if she won the lottery, it's still income and it gets taxed.

I see no problem here. Although I would say they should be exempt from paying tax on the actual medal itself, unless they were to go and sell it or something.

[Hal-9000]

I see a huge problem...it's Olympic winnings and they already have to pay or get sponsored just to train. They win a medal on behalf of their country and then the country garnishes a tariff?

:lol: welcome back to merry ol England, 15 century

[Teh One Who Knocks]

Then change the law....otherwise, I don't see the outrage.

:dunno:

[Hal-9000]

You'd think something like a medal and associated winnings from the Olympics would be exempt....next you'll be saying that drug dealers should be taxed on their transactions :lol:



wait.... :-k

[Richard Cranium]

Because conservatives are scrooges,

Who writes this horse shit? fucking pathetic douche bags

[Muddy]

It doesn't matter how old she is, income is income...if she earned that money at a job or if she won the lottery, it's still income and it gets taxed.

I see no problem here. Although I would say they should be exempt from paying tax on the actual medal itself, unless they were to go and sell it or something.

I think this is reasonable...

[deebakes]

bananas :shock:

[Shady]

If I read this right, they only pay tax on the prize money that is awarded to them by the USOC. I don't believe that they tax the medal itself. So income is income. Although missy Franklin will probably deny the prize money because of the crazy NCAA. It should be mentioned that the IOC does not give out a cash prize.

[Teh One Who Knocks]

PolitiFact.com


With Americans paying close attention to the London Olympics, two leading figures in the conservative movement -- Grover Norquist and Marco Rubio -- have launched an effort to lighten the tax burden for athletes who win medals.

A July 31, 2012, blog post on the website of Norquist’s group, Americans for Tax Reform, had the headline, "Win Olympic Gold, Pay the IRS: U.S. Olympic medal winners will owe up to $9,000 to the IRS."

The ATR blog post continued, "American medalists face a top income tax rate of 35 percent," ATR wrote. "Under U.S. tax law, they must add the value of their Olympic medals and prizes to their taxable income. … At today’s commodity prices, the value of a gold medal is about $675. A silver medal is worth about $385 while a bronze medal is worth under $5. There are also cash prizes that accompany each medal: $25,000 for gold, $15,000 for silver, and $10,000 for bronze." These prizes are given by the U.S. Olympic Committee.

ATR went on to offer calculations of what medal winners might owe the IRS, using that 35 percent tax rate. A gold-medal winner would owe $8,986, while a silver-medal winner would owe $5,385 and a bronze winner would owe $3,502.

These calculations were widely noted in the blogosphere. The following day, Aug. 1, Sen. Marco Rubio, R-Fla., introduced the Olympic Tax Elimination Act, which would "exempt U.S. Olympic medal winners from paying taxes on their hard-earned medals."

Rubio’s news release said the U.S. tax code "is a complicated and burdensome mess that too often punishes success, and the tax imposed on Olympic medal winners is a classic example of this madness. Athletes representing our nation overseas in the Olympics shouldn’t have to worry about an extra tax bill waiting for them back home." (A new Olympics tax exemption might make the tax code more complicated, but we digress.)

After a reader notified us of this developing issue, we decided to fact-check ATR’s specific claim that "U.S. Olympic medal winners will owe up to $9,000 to the IRS."

We checked with accountants who specialize in representing athletes and they agreed that the bonus would almost certainly be taxable. Our experts diverged somewhat over whether and how the medal would be treated for tax purposes, but we’ll assume for the purposes of our analysis that it is subject to taxation.

We will also note that ATR said "winners will owe up to $9,000" -- a phrase that gives the group leeway for its estimates.

Still, the experts we spoke to suggested that a $9,000 tax payment was unrealistically high. For most athletes, the payment will be less, and possibly quite a bit less. Here’s why:

Business expenses

An athlete who wins a medal bonus would be free to deduct any unreimbursed expenses from the bonus, lowering -- or maybe even eliminating -- their tax hit. In fact, accountants say an athlete would be crazy not to.

"Anything used for the production of income is deductible," said Brad Bell, a partner with BGBC Partners LLP in Indianapolis who specializes in accounting for athletes.

Greg Shafer, an accountant in Colorado Springs, Colo., added that "if they were my client and had to pay that kind of tax, I would say, ‘Well, what are your ordinary and necessary expenses?’ That could be travel, uniforms, cell phone use." The U.S. Olympic Committee is based in Colorado Springs, and Shafer said he has provided accounting services to athletes.

So expenses for gymnasts might include tumbling classes, payments to coaches and travel costs to international meets. Cyclists would pay for new bikes and maintenance. An Olympian fencer told Forbes.com that her expenses for equipment and competitions run around $20,000 per year.

Not every athlete earns as much as Michael Phelps

The way the U.S. tax system is constructed, income is taxed at higher rates the higher your income goes. So the full 35 percent rate (known as the marginal rate) only kicks in on income earned after you pass a threshold of about $380,000. Below that level, income is taxed at lower tax rates.

So even someone earning well into the six figures will likely see an overall (or "effective") tax rate quite a bit lower than 35 percent -- even before you take into account exemptions and deductions.

When we contacted ATR, Ryan Ellis, the group’s tax policy director, defended the calculations. He said that when you’re isolating a specific element of someone’s income, it’s actually more appropriate to use marginal tax rates rather than effective tax rates, because in the calculation, the medal is the essentially the last piece of income being considered, and thus gets taxed at the highest marginal income rate.

He added that while athletes may scrape by in low tax brackets in non-Olympic years, the Olympic year is the one in which they would have a reasonable shot of getting into a higher tax bracket -- if not 35 percent, then perhaps 33 percent or 28 percent, a rate that would still produce a high tax bill.

Still, while some world-class athletes come into the Olympics as international superstars with lucrative endorsement deals, many athletes earn less. Though the data is incomplete, we did find one study conducted by the Track & Field Athletes Association that found that about half of track and field athletes who ranked in the top 10 in the U.S. in their event made less than $15,000 annually from the sport in sponsorship, grants and prize money. About 20 percent of such athletes made more than $50,000 annually. And beyond marquee athletes such as sprinters, milers and distance runners it's toughest of all, the study found.

There’s anecdotal evidence as well. Marathoner Brian Sell, who made the 2008 U.S. Olympic team, told CNNMoney that it took years of struggle, including three years earning less than $25,000, before he made significant money from running. "It's a small percentage of people who make a real living in this sport," he told CNNMoney. "And if you didn't run well, you didn't get paid."

An athlete earning the same $25,000 a year that Sell earned for three straight years would pay about 15 percent on gold medal winnings. That would be $3,851 -- before accounting for any allowable expenses.

We should also note that there is nothing special or "extra" about the taxes levied on income derived from Olympic victories. They are the same taxes laid on any kind of income, whether that’s from wages or lottery winnings.

Our ruling

Americans for Tax Reform is correct that gold medalists’ winnings are taxable, and it provides some leeway by saying that U.S. winners could be taxed up to $9,000.

Still, it’s not likely that anyone would pay that much per medal in taxes -- even if the winner was fortunate enough to have annual income well over $380,000 and refused to deduct any business expenses on their winnings. Any accountant worth their salt should be able to get the rate of tax on medal winnings much below $9,000, and maybe even to zero. We rate the statement Mostly False.