One of our favorite blogs, TaxProf Blog has been chronicling this year’s stories in tax bringing us facts like how tax fraud is increasing by 181% this year and that the IRS is allowing kidnappers to take a dependent deduction for victims.
Our favorite story was about professional athletes. Did you know that twenty states require visiting athletes to pay state income tax for games played within the state? Reported in the L.A. Times and picked up by TaxProf Blog, it comes as no surprise that this is controversial as, in most cases, other highly paid professionals are not taxed for payments resulting from duties performed outside the home state. Imagine being Ichiro Suzuki, the highest paid player on the Seattle Mariners:
Athletes are taxed based on “duty days” they spend in each state. In baseball, there are approximately 181 “duty days,” meaning a player earning $1.81 million would make $10,000 each duty day. Therefore, if that player’s team had three games in California, he would be responsible for taxes on $30,000 of income.
At that point, all the tax collectors have left is a math problem to figure out that Ichiro Suzuki, the highest-paid baseball player in Washington, a tax-free state, will have to pay more than $218,000 in California taxes for the 25 games the Mariners will play there this summer.
Finally, if you haven’t already seen it, here’s a fun tool: plug in amounts you paid for social security tax, medicare tax, and income tax and learn how much you contributed to national projects. For example, if you paid $20,000 in taxes this year, you contributed $140 to NASA. Check out your tax day receipt here.