What about TP's unpaid taxes?
Let's assume that he only made half of the $20-40K mentioned from signing his gear. Assuming he is still classified as a dependent (not sure), I believe the minimum annual amount for earnings without filing a tax return is $5,700. It seems plausible that he exceeded that amount in any one of his three years at school so I assume there has to be a tax bill due.
I have not read anything regarding this angle, but the IRS is one organization that has ways to uncover whatever paperwork they want, particularly since Dennis Talbott, his partner in crime is also being pursued for unpaid taxes (http://sports.espn.go.com/ncf/news/story?id=6637444). I could only hope this helps the NCAA if they do not get enough from the checks (!) written to TP from Talbott.
Wasn't the car dealer/booster also indicted for tax problems? The IRS may want Pryor's "cooperation" even if they are not genuinely interested in nabbing him for failure to file. They have ways of encouraging cooperation that the NCAA lacks.
As a tax accountant this was one of the first things that I thought of when all these stories started breaking.
The tax implications of trading goods for tattoos is also something that I would be interested in from a tax perspective.
http://www.myfox28columbus.com/shared/newsroom/top_stories/videos/wtte_vid_11495.shtml
Pryor Could Face IRS Payments?
COLUMBUS -- Recent allegations that former OSU Quarter Back Terrelle Pryor earned as much as $40,000 for signing memorabilia could have him answering to the IRS.
According to a Columbus tax attorney professor everything, Pryor exchanged for cash or services is considered income. That includes the sale of any personal memorabilia like gold pants or championship Rings -- even the market value of any tattoos he was given.
If Pryor didn't report these as income to the Internal Revenue Service, then he faces even more trouble in the form of penalties and interest.
... when he reaches an agreement with the taxman for back taxes, he sort of implicitely agrees that he was being paid while playing... and that there is your smoking gun.
it contains the standard boilerplate that the settlement is not an admission of guilt or liabiliity but is done to avoid the time and cost of continued litigation or tax proceedings.
And while I can see the case for having to claim income for autographs, selling goods for money is not "income," is it? If the items were his, and he therefore presumably had full equity in them, his worth did not increase (i.e. there was no profit).
full equity, but whether there was profit depends on his basis in the goods sold (unless he is classified as one whose trade of business was selling these goods). I'm pretty sure that if he stole the goods, he essentially takes with zero basis- the entire FMV of the good is profit. If the goods were a gift, well OSU would die if they were classified as gifts (they would also owe gift tax on the transaction).
They aren't technically "gifts," but they aren't compensation (he isn't an employee, and they don't get rings for services). If that were the case, they would owe taxes on the rings when they were received. The only thing I can think of would be some sort of capital asset, but that doesn't seem right either.
Screw it. Tax the hell out of him.
I was thinking more about the equipment he was taking, but with respect to the big ten rings and things like that, I would think they are treated as gifts for which the university owes gift tax- although the universities may well be exempt from those for all I know.
But you only have to pay gift tax if the gift is more that $10,000 per per per year right? Also, as a public institution I'd guess they are exempt
It isn't necessarily income: he's trading a thing of value for another thing of value. There was arguably no accession to wealth, and therefore no income to tax.
I'm asking this seriously, but if he got stacks of cash for signing autographs, how is that different than any other type of labor with compensation given?
My understanding is that signing autographs is "labor," and any income derived therefrom is taxable.
But selling one's stuff doesn't. From my understanding, he can sell his championhip rings, and the result isn't income for IRS purposes. Moreover, if he signs and sells a helmet, the value of the helmet would not be income, but any added value from the signature that he received would be taxable.
To sell the helmet, in your example, the helmet has to be his. TP was taking helmets and shoulder pads that were not his and selling them. I don't really know what category that would fall into tax-wise, I guess regular income, plain and simple . . . .
The ring, of course, he could sell, but the excess over his basis would be income. Given that his basis was zero, I'd think all of it is taxable, but I haven't looked at those rules in eons . . .
But if the rings were gifts, don't the donees receive the basis of the donor, which would (theoretically) be their full value? TP would have sold them for more than its original value, but I think he acquired SOME basis when he received it...
But yeah, as I mentioned below, I forgot that he yoinked some of the stuff he stole. So he'd be on the hook for that.
I don't know what a championship ring counts as. Is it a gift? I haven't a clue. I get what you'e saying if it is a gift. It genuinely hadn't occurred to me to look at it that way. I have no idea how to categorize something that is voluntarily given, but upon the basis of performance.
It is income.
The bottom line is this. If I sell my car, it's not income. If I sign the windshield before I sell it, it's income.
Totally making shit up...
What about the cash he recevied?
If his cost basis in the things he is trading for goods/services of value is zero (e.g. stolen fball eqpt, gold pants charms, etc.), there may be a problem.
Selling autographs for cash is taxable income. Really no gray area there.
I forgot that he kinda boosted some of the stuff, in which case he would have no equity. However, if the gold pants/rings/etc. were his, he would have a full cost basis (they were essentially gifts), and could sell them without accruing income.
I think,.
TP's basis would be the value of the item at the time he received it. If he sold the items for more than that basis, the excess is fully taxable. However, there has been a zero percent capital gains rate in effect for a few years if the income is low enough. We are all waiting to find out that income number.
I would argue that he received the rings, gold pants etc. as payment for services and therefore should be fully taxable. I may be a little biased.
The rate on long term capital gains (Item owned for more than a year) is 15% but short term capital gains are taxed at the ordinary income tax rates in effect for the year, ranging from 10% to 35%.
Meh...not exactly true. It all comes down to the value assigned to the items being traded. If the FMV of a piece of game worn equipment is set at $300 and Pryor was paid $500 cash for it...he technically earned $200 of income. That said you'd have to question his tax basis in the equipment he is trading as well...if he got it for free by looting the OSU equipment room he technically has $0 of basis in that item and the income earned would be $500. He's making money off something he did not have to give up something for....there is your "accession to wealth".
I'm pretty sure this is all he does for a living now
Does he have to pay self-employment tax too?
He may have paid taxes...
/I may have slept with Reese Witherspoon too...
Great to hear about your experience with Reese. That's awesome. FWIW, I don't think TP paid his taxes.
but didn't get an answer so I will ask it here:
Would the IRS really make a fuss about this? I mean, this money was spread over three years so if he got $40,000 (and that seems to be the high end from reports) that is less than $15,000 per year. With the personal exemption you guy get in the USA (I am not sure what it is but assume you have one) would they really investigate something that might be anywhere from 2-10 thousand dollars? I would think they would have bigger fish to fry than that considering the populoation of the USA.
They will care. It may take them a while, but he will get his. I mean hell, they audit people (like myself) over a few hundred dollars and I actually filed.
It will be a non-issue. A mea culpa will be extended. Taxes and penalties will be paid. It may amount to $20k or $50k. Even if it were $100k, his earning potential is such that it wouldn't be a big deal.
He is a project at best and has some personal issues they may turn teams off. I personally question whether or not he will interview well and don't see him having a very high IQ when a pro coach gets him in a film session.
but NFL league minimum salary would probably be around $340k. Say the IRS can "prove" unreported income of $40,000 for 2010. The unpaid tax liability would be around $6000. Even with interest and penalties it would probably not be much more than $10k. That would be about half of his first month's paycheck (after taxes withheld for the current year).
Not really worth fighting about on the part of the IRS or Terrelle Pryor. If the IRS could somehow prove $100k in unreported income in the same scenario, the tax liability would be about $22k. Interest and and penalties would bring that up maybe to $30-35k. Still relatively easy to pay off as a lender (bank, agent, otherwise) could easily front that money.
I think sometimes we think in terms of "what would we do". Most of us probably don't have agents willing to front us tens of thousands of dollars. And the fun thing is that the money provided would be termed a loan, or taken as a loss, and interest payments would be deductible against future tax liabilities.
Even if he pays one dollar in taxes, isn't that the point? The amount he pays is negligible. As long as the IRS says he has earned taxable income he'll have to prove how
California sure as shit would care. I'm a Michigan resident for tax purposes, but they try to get me and anyone else in the military to pay taxes every year. They need cash yo.
Not sure if this would be considered income to the IRS because, as was stated above, value was traded for value. But if Ohio is anything like Illinois, there are likely Sales and Use Tax implications. For example, if I sell my car tomorrow for $10,000, the state is going to want a piece of that. And I'm guessing Ohio could use any tax revenue they can get at this point.
If TP has a back tax problem, he should just take up a collection from his loyal Buckeye fans. They'll be sure to help him out in his hour of need. Or maybe he could just borrow from his (former) coach, Jim Tressel. I bet JT would be happy to share some of the proceeds from "The Winners Manual" with Terrelle. . . .
He probably shouldn't have snubbed the CFL. In the end, it seems as if he will somehow admit to being paid regardless.
interested in this too, even though its probably not going to end in anything.
selling a good you own doesnt = income, but if the items were the schools and then his, the transfer in ownership should technically have been income as well, right?
for example, winning the championship ring was taxable income if he was making above the minimimum reportable.
I mentioned this in another thread, but I was audited by the IRS back in 05 for Business Use of a Vehicle... oddly enough I wasnt even making that much money a year at the time..perhaps about what Terrell Pryor makes, maybe a bit less..
Anway...so I prepped for the Audit, got all of my receipts and ducks in a row .... and went downtown to this unmarked federal building in Long Beach here in CA. I had trouble finding the place because it was in a completely Unmarked building...no signs, not even a street address visible, and this was a tall 7 stoy office building maybe more... I had to go right up to the window to see the address...very non descript.
So I go in and its just a lobby and you need to call up to have someone buzz you up... I call and this armed security guard comes down... he frisks me with the wand and sees that I have a cell phone and my small pocket tape recorder.
I had arranged to have permission to tape the proccedings, and the sec. guard called up to confim that I did but he made me go back to my car and leave my cell phone there.
So I did that...come back 10 min later and call and then he came down and took me up to their office...No doubt on some unmarked floor that doesnt technicallly exist, ala "No Country for Old Men" style..
I get up there and he punches in the code behind the bullet proof glass to let me in and we go in...
Im "greeted" by the 2 IRS agents bruskly in this totally barren office. All white paint, all wood paneling. Nothing on any desk other than a computer. I was surprised that there was not even a photo of Richard Nixon on the wall...
They took me in to this white conference room with a plain wood table and then proceeded to lie out my life on that table.
They had everything on me... my bank accounts, transfer and deposit history, complete work history, my known addresses and aliases etc... everything on me going back to probably 1999.... they were like Mr. Kumbiyiashi from "The Usual Suspects"...they had everything that I had ever done in that little folder...
I prepped hard for that though, and I "won"... they got nothing on me and found me innocent of any penalties....when I left they remarked that they almost 100% get people on something and it was unusual to have someone like me who they couldnt nail... anyway I joked with the girl that they should send me a letter of congratulations and she said that they didnt do that...
but low and behold, 2 months later I got a personal letter of congratulations from her personally that i had passed the audit...so at least they or she had some sense of humour about it...
all of that for a guy who was making less than TP at the time...
If the IRS sniffs around him, he is in trouble.
If you get audited, NEVER and I mean NEVER bring any tax records except for the year they are auditing. They will 'ask' you to bring prior year records but you are under absolutely no obligation to do so under the U.S. Tax Code. Repeat: Only bring the records of the year they are auditing. They won't like it, but are powerless to do anything about it.
As Wolverine fans, our best hope is for the IRS and the FBI to gather enough evidence that the NCAA has no excuse not to lay the hammer down on THE Ohio State University. The Olentangy Mafia/Sacred Brotherhood can shut up everyone involved, but the feds are another story altogether.
If the IRS can bring down Al Capone, they can bring down THE Ohio State University.
If you really hate tOSU, then you want them to get some penalties but not so severe that they stop cheating. Then let them get caught again and get the hammer. Then again, some would argue we are already at the "let them get caught again" point...
Tater, its a frigging game for shit's sake. Do you really want the IRS and the FBI coming down on Pryor? He is an arrogant kid surrounded by those who would suck him dry. He was a damned college kid without a lick of sense. I'm happy to see his sorry ass out of there, but enough is enough.
I wish none of this had ever happened. It is a major stain on the conference and on college football.