Stephen R. Sylvanie-USA TODAY Sports
A conversation with a CPA who specializes in fighter taxes
Mike Perry’s celebration was short lived. Perry, gasping for breath after his win over Mickey Gall, sporting an open cut above his left eyebrow, told UFC commentator Jon Anik of his post-fight woes.
“I gotta pay some bills, pay some debts. I gotta go talk to the tax folk and see if we can run that number down because I believe I paid out over a $100,000 last year between a couple of different countries,” said Perry. “And then they try and hit me again at the end of the year.”
Perry is not the only fighter whose had problems with the taxman.
“I’ve never paid taxes in my life, I’m probably gonna go to jail,” Nick Diaz said after his loss to Georges St-Pierre at UFC 158. “That’s not because I don’t have, that’s not because – what, nobody wants to hear about that, nobody wants to hear about that kind of talk, or what’s really going on with me. But I might as well just be a kid, you know, I’ve had fight after fight after fight after fight, you know. You don’t know what that does to someone who didn’t graduate high school.”
Jon Jones also had a considerable tax bill to deal with in 2019. In October, Bloody Elbow reported Jones settled nearly $1.5 million in tax liens.
MMA fighters, especially those who compete outside their home state or home country — which includes most of the UFC roster — have a lot to deal with when it comes to income tax. Bloody Elbow spoke to Brad Smuckler, who handles taxes for many MMA fighters via CPA4MMA.com, about the issues professional fighters face with their income tax.
The single biggest issue Smuckler sees when working with fighters is they often use cash to take care of expenses because it’s the easiest and most efficient way for them to deal with the multiple people they need to make whole.
The bad news is that with cash, there is no record of the transaction. With that, there is no way the fighter can claim the expense on their taxes. That’s an issue because most of those expenses would be deductible with a record.
Smuckler’s advice on this is to either pay via a debit card or have a receipt of some type.
“I have a template on Word and it’s basically a receipt saying, you provided work for me on this date or this period of dates and I paid you $X and then you sign and date with your social and at least now I have a receipt,” said Smuckler.
As for the biggest questions he gets from fighters, Smuckler said they usually focus on deductions. He also said it’s not uncommon for fighters to ask about catching up on filing taxes for years they might have failed to file a tax return.
When Smuckler sits down with a client he goes through a lengthy list of items which can be deducted. That list starts with “A” for advertising and ends with “T” for travel.
“There’s probably about 50 expenses they can deduct.” Smuckler said.
One of the biggest issues fighters who do their own taxes or who have their taxes performed by a professional who inputs the numbers into a standard program face is that international taxes often get overlooked.
“Most fighters don’t know how to deduct foreign tax, nor do most accountants,” Smuckler said. “If they went to an H&R Block or a Liberty Tax, almost guaranteed it’s wrong and they’ve lost all that international tax money, so that’s huge.”
International fighters should also be aware they can get a refund for taxes they paid in the United States. However, those fighters need a social security number or an Individual Taxpayer Identification Number (ITIN). If the fighter does not have one of those, they cannot get a refund on their taxes.
Smuckler said the difference between his firm and most other tax services is they know what to look for to help the fighter get their biggest return.
“We charge more, but we’re going to help them dig through their expenses. I often call it mining. I try and explain that we’re going to try and find as many nuggets as we can through that mining,” said Smuckler.
“For every $100 in receipts that we find (depending on the tax bracket), that’s $30 back for them. We’re looking for nuggets like that. Let’s say your iTunes totaled $500, that’s $150 you’re getting back. Some of these things are no brainers, but a lot of them aren’t.”
Another reason fighters might want to consider a firm like Smuckler’s is that they know MMA. Smuckler worked for the UFC for 10 years.
“Even if they have a big accounting firm doing their work, they still miss out on a lot of things. It’s not because the MMA person was bad. The other CPA might have a lot of athletes — NBA, NFL, NBA — but they’re employees,” he said.
“(Fighters) deduct gym fees, they deduct telephone, they deduct dues, they deduct music because they use that for workouts, they deduct certain clothing and washing their clothes. There are a lot of things that those independent contractors as athletes have to deduct that the big firm isn’t familiar with because they don’t watch the sport.”
Smuckler said he gets a lot of references through word of mouth. Right now approximately 300 fighters use his firm, many of which deal with Smuckler and his employees strictly online.