What to do after your first NIL payment

A first NIL payment is a good moment to set up habits that will save you stress later. None of the steps below take long. Most of them are harder to do months from now than they are this week.

1. Save the paperwork before you spend the money

Keep a copy of the agreement, even if it is only an email or a message thread that describes what you agreed to do and what you will receive. Then save a record of the payment itself: the date, the amount, who paid you, and how it arrived.

If you received a product or service instead of cash, or in addition to it, write down what it was, when you received it, and a reasonable estimate of its value. The IRS treats property and services received for NIL activity as income, so they need a record too.

Put everything in one place. A single folder in cloud storage, named by year, is enough to start. Our recordkeeping guide covers what to keep in more detail.

2. Set money aside before you spend it

If your payer did not withhold tax, which is typical when you are paid as an independent contractor, the tax on that payment has not been paid yet. The safest habit is to move part of each payment into a separate savings account and leave it alone until you know what you owe.

How much to set aside depends on your total income for the year, whether the income is subject to self-employment tax, your state, your expenses, and whether someone claims you as a dependent. We do not use a single percentage for every athlete because the right number can be very different from one situation to the next. Until you have a real estimate, err on the side of holding back more rather than less. It is much easier to spend extra savings later than to find money for a tax bill you did not plan for.

3. Find out how the payer will report it

Ask the payer, or your agent if you have one, a few simple questions:

• Are you paying me as an independent contractor or as an employee?
• Will you send me a Form 1099 or a Form W-2?
• Did you withhold any tax?

Before you are paid, a payer will usually ask for a Form W-9, which gives them your taxpayer identification number for reporting, or a Form W-4 if you are being paid as an employee. The IRS recommends completing whichever applies accurately. Only give your Social Security number to a payer you have confirmed is legitimate, through a secure method.

Remember that you must report NIL income even if you never receive a form. The forms help, but your own records are what count.

4. Look at estimated taxes

If you expect to owe $1,000 or more in federal tax when you file, the IRS generally expects you to pay during the year through estimated tax payments. Federal payments are due in four installments, with deadlines in April, June, September, and January. Many states have their own estimated payment rules.

A first payment is a good time to figure out whether you are likely to cross that line for the year, especially if more deals are coming.

5. Keep your athletic reporting separate

Tax reporting and NIL reporting for eligibility are different systems with different rules. Division I athletes must report third-party NIL deals worth $600 or more, in total, to NIL Go, the College Sports Commission’s platform, within five business days of signing or agreeing on payment terms. Your school, conference, or state may have additional requirements.

The NCAA recommends reviewing your campus NIL policy and applicable state law, and talking with your compliance office. Do that early, because missing an athletic reporting deadline is a separate problem from any tax question, and a CPA cannot resolve it for you.

6. Start tracking expenses that relate to the work

If you are self-employed for NIL purposes, some costs you pay to earn that income may be deductible. Common examples are fees paid to an agent, costs directly tied to creating paid content, or travel that is truly for NIL work. Keep receipts and a short note about why each expense relates to the NIL activity.

Be careful here. Not every cost connected to being an athlete is a business expense, and personal spending does not become deductible because it appears in a post. Deductions depend on the facts and on documentation that can support them.

7. Think before you form a business entity

You may hear that you should form an LLC right away. Sometimes an entity makes sense, but often it adds cost and paperwork without changing the tax result, and an entity choice can have legal and eligibility considerations as well as tax ones. The IRS suggests consulting a CPA or tax professional before forming a partnership, LLC, or corporation for NIL purposes. It is a decision worth making with your full picture in view, not because of what worked for someone else.

8. Tell the people who help you

If a parent, guardian, or advisor helps with your finances, make sure they know about the payment and where the records are. Clear communication now prevents confusion later, especially if a parent’s own tax return may be affected.

When to get help

A first payment is a natural time to talk with a CPA, particularly if you expect more deals, were paid in products or services, will work in more than one state, received payments from your school, or are unsure how a payer is classifying you. A short conversation early can prevent an expensive cleanup later.