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Posts Tagged ‘NFL’

Now Shooting Himself in the Foot

August 6th, 2012 No comments

Former New York Giant and New York Jet Plaxico Burress owes New York State over $59,000 in back taxes from his 2007 tax year, reports TMZ.

via Wikipedia

In 2007, Burress was a member of the New York Giants, playing under a 6-year, $25 million contract. The Giants won Super Bowl XLII that season in one of the greatest games of all time. Burress caught the game winning touchdown in the 17-14 victory over the New England Patriots, who ultimately came up one win short in their quest for the perfect 19-0 season.

Burress made major headlines in November 2008 after accidentally shooting himself in the leg at a New York City nightclub. New York State law mandates a 3 1/2 to 15-year prison sentence for any person convicted of possessing a gun without a license. At the time, his firearm license issued by Florida had expired, and he had no NY license.

In August 2009 Burress accepted a plea agreement resulting in a two-year sentence. Burress was released from prison in June 2011.

New York State tax warrants are public information. After a tax warrant is filed, the State may seek to collect on the liability by pursuing the taxpayer’s personal property. For example, the State could seize funds from a taxpayer’s bank account. I’ve seen the State issue bank levies without first warning the taxpayer, aside from filing the warrant.

The State maintains an electronic database of the warrants presented by the Department of Taxation and Finance. They may be searched by a combination of the taxpayer’s name or city, or county of filing.

Turning 35 on August 12, Burress is currently a free agent. In his first season after the prison release, he caught 45 passes for 612 yards and 8 touchdowns for the Jets. Standing 6’5″, he could provide help to a team looking to add a legitimate red zone target.

We’ll see if an NFL team takes a shot with him. (Poor pun intended.)

Former Giant, Eagle Fails to File Tax Returns

May 23rd, 2012 1 comment

William James Peterson, Jr. was drafted by the New York Giants in the third round of the 2001 NFL draft to play cornerback. Upon joining the Philadelphia Eagles in 2006, James dropped “Peterson Jr.” from his name.

Around the same time, James apparently thought he could also drop the requirement to file his tax returns. The Associated Press is reporting James has pleaded guilty to willfully failing to file tax returns from 2005 to 2009.

James also played for the Buffalo Bills and the Jacksonville Jaguars during those years. Prosecutors say he earned over $9 million throughout the five years in question.

James faces up to a year in prison and a $100,000 fine. His sentencing is scheduled for September 21. If he didn’t pay any federal income tax on $9 million, a one year maximum seems like a fairly lenient punishment.

Categories: Sports, Tax Fraud Tags:

Falling Incomplete with the Tax Law

March 6th, 2012 No comments

Freddie Mitchell has his place in NFL history. He was on the receiving end of a throw by Philadelphia Eagles quarterback Donovan McNabb on a 4th and 26 play during the final two minutes of the divisional round of the 2003-2004 playoffs. Had the pass fallen incomplete, the Green Bay Packers would have won and advanced. Instead, the Eagles forced the game into overtime and eventually won the game.

Mitchell was a first round draft pick and played in his last NFL game at the age of 26. Some former players go into coaching, some take up charity work. Others, unfortunately, get into trouble with the law.

6ABC is reporting Freddie Mitchell was indicted by a federal grand jury for conspiracy and income tax fraud. Read the indictment here.

Allegedly, Mitchell used his connections with professional athletes in order to defraud the government.

Mitchell introduced at least one athlete, “A.G.,” to a tax preparer who claimed she could obtain for the athlete a large federal tax refund. A.G. made a $100,000 down payment to Mitchell for the services. Using bogus information, the preparer filed A.G.’s 2008 tax return which reflected a $1,968,288 refund. Form 8888 was attached to the return in order to allocate portions of the refund to both Mitchell and the preparer.

This time, Mitchell’s play may put him behind bars.

I hope this story serves as a wake up call to professional athletes who are inexperienced with handling their finances. If it seems too good to be true, it probably is.

Categories: Sports, Tax Fraud Tags: ,

The NFL Won’t Be Alone in Pursuing Bounty Participants

March 4th, 2012 No comments

News broke on Friday that the New Orleans Saints employed a “bounty” system during the the past three NFL seasons.

I can’t say I’m surprised by this. After all, one of the NFL’s biggest draws is its high level of competitiveness throughout the league. Unfortunately, some teams are taking it way too far.

via Wikipedia

The NFL.com story reports that 22 to 27 defensive players were involved, including linebacker Jonathan Vilma. Allegedly, before the 2009 NFC Championship game against Brett Favre and the Minnesota Vikings, Vilma offered $10,000 cash to any defensive teammate who knocked Favre out of the game. According to the NFL’s report, the team’s then defensive coordinator Gregg Williams administered the bounties.

How will the NFL punish those implicated? Some speculate the penalties will be worse than those imposed on the New England Patriots for the 2007 Spygate scandal: Coach Bill Belichick was personally fined $500,000, and the franchise was fined $250,000 and lost a first round draft pick.

Taxgirl tells us what the imminent suspensions or fines may mean for tax purposes:

You can’t generally claim lost wages as a deduction. This is especially true if the wages were payable based on specific performance of a task. So if I were paid by the hour and I expected to work 20 hours, and I only worked 10 hours, I can’t claim the difference as a deduction. Similarly, if a player’s contract pays by the game, and he is banned from six games without pay, then his paycheck is simply lower. He reports a lesser amount of income than expected and takes no deduction.

If, however, there were an actually penalty or a fine, the result could be different. In that case, assuming that the payment of the fine or penalty could be considered an “ordinary and necessary” expense, the affected player might be able to take a tax deduction.

She opines that a fine for participating in the bounty system may be both ordinary and necessary. It’s arguably ordinary because some claim the practice is “commonplace” throughout the league. And it’s arguably necessary because the incentives created by the bounty system were both helpful and appropriate towards accomplishing the goal of winning football games.

There may be not only NFL sanctions, but also criminal charges brought by federal or state prosecutors. Sports Law professor Michael McCann walks through the gamut of possible legal claims, including tax evasion:

Players who received bounty payments should have reported them as taxable income; even if the payments arose because of criminal activity, such “ill gotten gains” are taxable. Failure to pay one’s full share of taxes constitutes tax evasion. The IRS and Louisiana Department of Revenue are likely following the bounty system scandal with a watchful eye.

As readers of this blog are well aware, Mr. McCann is absolutely correct: Illegal income is taxable income.

We don’t know exactly how much in bounty payments were made. And it’s possible that bounty recipients claimed the income. But suppose they didn’t. Even if the total amount of tax owed is not more than, say, $50,000, I wouldn’t be surprised if the tax authorities consider pursuing tax fraud charges.

“But the small amount at stake isn’t worth investing the resources required to build and try the case,” you say. There’s more to be gained than monetary restitution.

As I learned during my first year in law school, one of the primary purposes of criminal punishment is for general deterrence. Punishing public figures for tax evasion may deter others from doing the same sometime in the future. The reality is that the story of tax evasion charges brought against an NFL player is far more likely to be picked up by major news outlets than a story of the same charges brought against a John Doe.

The burden of proof is on the prosecution to show the taxpayer had the intent to evade paying tax. Federal prosecutors failed to meet this burden after they charged former NBA referee Steve Javie with failing to report income he received by downgrading airline tickets provided to him by the league.

We’ll see if prosecutors feel enough evidence is present to indict bounty recipients for tax evasion.

Categories: Sports Tags:

Redskin Deeper in the Red

December 18th, 2011 No comments

The Tax Watchdog is reporting that Washington Redskins wide receiver Santana Moss is in debt to the IRS, evidenced by a Notice of Federal Tax Lien recently filed for an unpaid balance of over $258,000. The lien pertains to liabilities owed from his 2006 income tax year.

via Wikipedia

In 2006, Santana Moss earned $1,910,000 playing for the Redskins. One can’t tell from the lien whether the liability is tied to this income. In addition, the lien doesn’t necessarily include all of his IRS liabilities. I’m not saying he definitely owes more in back taxes, however. The point is that a Notice of Federal Tax Lien need not be comprehensive.

The lien establishes IRS priority on his multi-million dollar home in Florida. The priority is essentially worthless, however, if he has a mortgage on the home exceeding its fair market value. That’s because the lender has higher priority over the IRS upon disposition of a residence subject to IRS lien. If Moss has equity in his home, then the lien provides the IRS priority over unsecured creditors, if any.

Of course, Moss can make the lien disappear if he pays the balance in full. In July, he inked a three-year deal with the Redskins, including $6 million guaranteed. With such income, one would think he should be able to make whole with the IRS.

Categories: Sports Tags: ,
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