The Real Athlete Blog

The quality of professionals that an athlete surrounds oneself with directly influences a player’s quality of living long after the playing days are over. The sports department at my organization, Berenfeld LLP, primarily focuses on tax and accounting management. Typically, a professional athlete can expect to encounter the following types of professionals:

As I mentioned previously in The Hard Truth, a professional’s access and ability (i.e. Resources, Toys and Contacts) will provide a competitive advantage in recruiting. Ultimately, however, it is an athlete’s understanding and interest in his or her own personal affairs that will provide the absolute advantage. 

In my business, we deal with money, and lots of it. Our number one focus is taxes. Often overlooked or left to the judgment of a financial advisor, taxes affect your bottom line. Taxes are, especially for athletes, complex, requiring multi-state filings, federal filings, and, sometimes, foreign tax filings that require the application of several specific tax codes. An honest Certified Public Account (or “CPA”) is there to protect and grow your income.

Protection:  “The difference between tax avoidance and tax evasion is the thickness of a prison wall.” - Denis Healey

Tax Avoidance, Tax Evasion, Tax Fraud and so on... happen. Often times it is a deliberate act. Other times, however, these crimes are committed unknowingly. Either way, the penalties when convicted may be harsh. For example: 

One offense many young athletes can relate to is forgetting to claim income earned at an autograph/memorabilia signing. This is tax fraud. Hall of Famer Willie McCovey pleaded guilty to this crime, and was sentenced to two years of probation and fined $5,000. Willie McCovey had a professional accountant at the time.

Failing to file or providing false information on your tax return is a crime. High profile persons (athletes and entertainers especially) who are known in their respective communities are at an increased risk because taxing authorities may wish to make an example of them. The Internal Revenue Service (IRS) probably takes the position that a person with enough money worthy of their audit time, should have the appropriate professionals in place to ensure they are following the law. The IRS tends to pursue only the most egregious cases; however, to keep the public guessing, on occasion even average citizens are occasionally criminally prosecuted. Other taxing authorities – at both the state and local level – will also take interest in violations of the tax codes. 

Full Disclosure and Accountability
This is a timely sub-topic amidst the backdrop of recent financial scandals, such as Bernie Madoff, Stanford Securities, and UBS. The truth: Unethical behavior is prevalent in the sports business. Real estate scandals, investment schemes, inflated bills, cash transfers without knowledge, are common examples of professional crimes facing uninformed athletes. And the only protection an athlete has against unintended involvement in such behavior is to actively engage in, and take responsibility for, his or her personal finances.

Accounting is an important task, especially when it comes to a high-income earner with little personal legal and financial experience. A client with proper accounting management should be reviewing cash-flow statements monthly. Basic financial statements will breakdown your assets and liabilities, expenditures, and future income. Lifestyle choices can often times become financially overwhelming. Ask your accounting firm for a breakdown of your recurring monthly expenses, so you can then analyze your spending based on an itemized basis (e.g., travel, food, entertainment and cash).

Another way to be involved, and this especially works well for overseas athletes, is to use an online money management program that will aggregate your bank accounts, update your statements, and be accessible by both the client and the accounting firm. At Berenfeld, we recommend TrustedAlliance to keep both our clients and ourselves constantly updated.

The most successful clients are those that call, ask questions, and are genuinely interested in their own business affairs, no matter how mundane. Last week, I received a phone call from an individual playing in the NFL. He was shopping at Best Buy, and wanted to know what television he should purchase. We both knew he could easily afford any television before him; but his concern was actually about eliminating wasteful spending, developing good habits, and protecting his long-term financial situation. In the end, we opted for the largest television, but only after making sure that it was the financially smart decision for him. This may be a small example with small risk to most of my readers, but the point here is one of educated and informed reliance. Switch out the television for a multi-million dollar home and the risk changes.  At the end of the day, my high profile athletes and I agree on something very important: Everyone’s got game. Mine isn’t football.

Noah Matheu
Managing Director
Berenfeld Legacy Group
Twitter: @NoahMatheu
www.NoahMatheu.com
www.berenfeldllp.com