While millions of Americans were glued to their televisions to watch American snowboarder Jamie Anderson crush her competition in the women’s snowboarding slopestyle event, the IRS was quietly getting ready to make sure that all our Olympic winners pay taxes on their victories.
It’s true. Under the US Internal Revenue Code, the $10,000 to $25,000 each medal winner receives and the medal itself is taxable. That’s true even though the competition took place in Russia and not the United States. For some athletes, that means a tax bill of up to $9,000.
There is considerable debate as to whether the United States system of citizen based taxation is fair. Winning Olympic athletes from most other countries don’t have to worry about their medals being taxed.
A Republican Congressman from Texas, Blake Farenthold, has introduced the Tax Exemption for American Medalists Act (“TEAM”) in the hopes of eliminating those taxes by changing the tax code. Two years ago a similar effort by Farenthold and Florida Sen. Marco Rubio failed during the 2012 summer Olympics in London.
In a prepared statement, Farenthold said, “This needless tax illustrates how complicated and burdensome our tax code has become. We need a fairer system for all, and eliminating this unnecessary tax burden on our athletes is a good way to start. Our Olympic athletes are the true embodiment of the American spirit. As they represent our nation on the world stage in the upcoming Winter Olympics, they should be faced with our undying support—not with excessive taxes.”
We thought most Americans would be in favor of the legislation but there appears to be some backlash. One man commented that an Olympian who comes home with 4 medals could conceivably make $100,000 tax free while millions of hard working Americans struggle to support their families on far less income yet have to pay taxes. Another commented on the millions of endorsements medal winners can make as a result of winning a medal.
Farenthold’s TEAM Act does have some supporters, however. One wrote, “These athletes mostly compete as amateurs. They do not get to deduct their expenses as business costs if they do not win. They sacrifice their time, efforts and pay many of their own costs to represent us.”
It’s clearly a decisive issue with arguments on both sides. The takeaway is to remember that even income earned outside the U.S. may be taxable. Every year, thousands of taxpayers learn that lesson the hard way. If you live or work outside the United States, you must still file tax returns here. That doesn’t mean that you will owe any money – the IRS allows a credit for certain taxes paid to other jurisdictions.
If you have significant offshore income or financial assets, speak with a qualified IRS tax attorney well versed in offshore reporting.
The tax lawyers Mahany & Ertl will gladly provide confidential, no-fee initial consultations to help answer your foreign reporting questions and explain your responsibilities. Thereafter, most services can be provided on a reasonable flat fee.
For a free consultation, contact attorney Bethany Canfield at or by phone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and will be answered within 1 business day. (We also have hundreds of text searchable posts on our Due Diligence blog.)
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