Many college athletes earning NIL income are surprised to learn that taxes may need to be paid during the year, not just when a tax return is filed. This is where quarterly estimated taxes come in.
Quarterly taxes are not just a concern for business owners. They may also matter for student athletes who earn NIL income as independent contractors and do not have taxes withheld from their payments.
What Are Quarterly Estimated Taxes?
Quarterly estimated taxes are payments made to the IRS during the year to cover income tax and, when applicable, self-employment tax. They are commonly used by freelancers, business owners, and independent contractors.
Many NIL deals function in a similar way. If an athlete receives payments without withholding, they may need to make estimated payments instead of waiting until April.
Why NIL Athletes May Need to Pay Quarterly
When someone works as an employee, taxes are usually withheld from each paycheck. With NIL income, that often does not happen.
If the athlete is paid as an independent contractor, the responsibility shifts to the athlete. That means the athlete may need to set aside money and make payments during the year.
This Is Not Just a Large Deal Problem
Even moderate NIL income can create tax planning issues if the athlete spends everything received. The challenge is not always the size of the income. It is the lack of withholding.
A few smaller deals can add up, especially if the athlete receives cash payments, appearance fees, social media income, or free products with value.
How Families Can Stay Organized
The best way to avoid year-end tax stress is to build a routine.
- Track each NIL payment as it is received.
- Save contract details and payment confirmations.
- Move a portion of each payment into a tax reserve account.
- Review income each quarter.
- Coordinate with a CPA before deadlines arrive.
Budgeting and Taxes Should Work Together
Quarterly taxes should be part of the athlete’s overall budget. If taxes are not built into the budget, spending decisions may be based on money that is not fully available.
A simple NIL budgeting system can help athletes see what is available for spending after taxes and savings are considered.
When Should a CPA Get Involved?
A CPA can be helpful once NIL income becomes more than occasional small payments. They can estimate tax liability, help with deductions, explain state tax issues, and determine whether quarterly payments are needed.
Parents should not wait until tax season to ask these questions. By then, the athlete may already have missed opportunities to plan.
Frequently Asked Questions
Not necessarily. It depends on how much tax the athlete is expected to owe, how income is reported, and whether any taxes are withheld.
They may owe taxes, penalties, and interest when filing their tax return. A tax professional can help determine what is required.
Closing Thoughts
Quarterly taxes are one of the least exciting parts of NIL income, but they are also one of the most important. Getting ahead of them can prevent penalties, stress, and cash flow surprises.
Athletes who learn this early are building a valuable financial habit. They are learning how to manage income like a business, which can serve them well long after their playing career ends.