Last February, a host of parents began calling an athletics administrator at a Division I program. Their athletes had received tax bills for the previous year’s NIL income, and the families hadn’t expected them. The team was having a good season and went on to make the NCAA tournament. The coach asked the administrator to help the players deal with the tax bills, but he did not have the knowledge or qualifications to give tax advice, especially on international tax law.
Scout hears similar horror stories on a regular basis from athletic departments across the country. At one school, athletes were paid all year with nothing withheld, and neither they nor their parents knew they should have been setting money aside or making estimated payments. Very few had enough left to pay when the bills arrived.
This happens because college athletes are treated as independent contractors. When a school or collective pays a U.S. athlete, it reports the payment on a Form 1099 and withholds nothing. The athlete owes federal income tax and 15.3% self-employment tax, plus state tax in most states, and is supposed to pay it in quarterly estimates during the year. Schools can now pay athletes up to $21.58 million per school in 2026-27, up from $20.5 million last year, so many more athletes are receiving significant income.
“Most of the people I collected from at the IRS were self-employed. Nothing was withheld from their income, they spent it, and they didn’t have the money in April,” said Thad Madden, Head of Tax at Scout. “College athletes are being paid the same way.”
Madden worked at the IRS for 38 years and helped lead its work on NIL compliance before he retired in 2024. He testified before the House Ways and Means Committee on June 30 and said Congress should require withholding on revenue-share payments. In the meantime he suggests schools offer voluntary withholding. He has seen one school do it.
International athletes are a different case because withholding is required. There are nearly 25,000 of them in NCAA sports, about 13% of Division I athletes, according to NCAA research. Most count as nonresidents for tax purposes. A U.S. payer has to withhold 30% of each payment unless the athlete has treaty paperwork on file, and has to report the payment on Form 1042-S. Nonresident athletes should not get a 1099.
If the school doesn’t withhold, the IRS can collect the tax from the school, because the school is the withholding agent. There is also a penalty of up to $340 for each Form 1042-S that isn’t filed.
At one school, a payment vendor paid athletes on F-1 visas without withholding anything, and multiple fines followed. That vendor had also missed payments and paid the wrong people.
“Schools are used to the athlete being responsible for the tax. With an international athlete, the school is responsible for withholding it,” Madden said. “The treaty paperwork takes time, so it needs to be started before the first payment.”
To get a lower treaty rate, the athlete files Form W-8BEN. That form needs an Individual Taxpayer Identification Number, or an ITIN, and to issue one the IRS has to verify the athlete’s passport. Without the form, 30% comes out of every payment even if the athlete’s home country has a treaty that allows less. Athletes who do get a reduced rate usually still have to file a nonresident return, Form 1040-NR.
Immigration is a separate question from tax. An F-1 visa restricts what a student can be paid to do in the U.S., so a payment can be handled correctly for tax and still cause a visa problem. Schools paying international athletes should have immigration counsel look at the arrangement too.
The administrator who took those calls says he now wants athletes taught about taxes before they are paid, and wants them to have someone qualified to call afterward. He cares most about this for international athletes, who should understand withholding before they see it taken out of a payment.
Before the first payment, that means confirming each athlete’s tax residency, collecting a W-9 or W-8BEN, starting ITIN applications for athletes who need them, and telling athletes and parents what will and won’t be withheld. Once payments start, athletes need the right year-end form, someone to prepare their return, and help if the IRS sends a notice.
Scout offers a university-sponsored tax program for domestic and international athletes. In addition to on-campus education for admins, coaches, and players, Scout provides quarterly estimated tax planning, federal and state returns, and IRS representation for domestic athletes, while assisting nonresident athletes with ITIN applications, W-8BEN and treaty support, Form 1042-S issuances, and Form 1040-NR filing.
To go over how your program handles athlete taxes, book a call with Scout’s tax team.
This article is for general information and is not tax or legal advice. Tax and immigration rules change and vary by country.
About Scout
Scout is an innovative financial technology company built specifically for athletes. Combining education, one-on-one support, and a mobile app, Scout helps student-athletes navigate taxes, savings, LLC formation, and investment planning. For athletic departments, its end-to-end revenue distribution platform brings every payment type, cap management, contracts, and taxes into one place. Trusted by more than 40 schools nationwide, Scout serves athletes, coaches, and finance teams with the financial infrastructure and education college sports now requires. From the first offer to the final payment, Scout runs the financial side of college sports.
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