What records to keep for NIL income and expenses

Good records are what make everything else possible: accurate estimated payments, a correct tax return, supportable deductions, and a clear answer if a payer, school, or tax agency ever asks a question. They also make life easier for anyone helping you, whether that is a parent, an agent, or a CPA.

The good news is that a useful system can be simple. What matters is that it is consistent and kept up during the year, not rebuilt from memory in March.

Start with one place

Create a single folder, in cloud storage you control, for NIL records. Inside it, make a folder for each year, and within each year, a folder for each deal or payer. Add a simple spreadsheet or tracking tool with one row for each payment or item received.

If the NIL activity is substantial, a separate bank account for NIL income and related expenses makes tracking much easier. It is not a legal requirement, but it keeps personal and NIL money from blending together.

For each deal or payer, keep

• The agreement. A signed contract, or the emails and messages that show what you agreed to do and what you would receive.
• Payment records. Deposit records, payment app statements, or checks showing the date, amount, and who paid you.
• Products and services received. What it was, the date, and evidence of its value. See products and services instead of cash.
• Tax forms. Any Form W-9 or W-4 you completed, and any Form 1099 or W-2 you receive.
• Proof of the work. Links to posts, event details, or deliverables. This supports both the business purpose of the deal and your own records.
• Where the work happened. The IRS recommends tracking the locations where you perform NIL services, because you may owe tax to a state where you earn NIL income.

The NCAA advises keeping complete records of all NIL activity for athletic compliance purposes as well. The same records often serve both needs, but the reporting itself is separate.

For expenses, keep

If you are self-employed for NIL purposes, some expenses you pay to earn that income may be deductible. The IRS explains that to be deductible, a business expense must be both ordinary and necessary: common and accepted in that line of business, and helpful and appropriate for it. When an expense is partly business and partly personal, the personal part is generally not deductible.

For each expense you think relates to NIL work, the IRS says supporting documents should identify:

• Who was paid
• How much was paid, with proof of payment
• The date
• A description showing what was purchased and that it was for the business

In practice, that means the receipt plus a one-line note, such as “photographer for sponsored post, Brand X campaign.” For travel, keep the purpose and dates. If you drive for NIL work, a mileage log kept at the time is far more reliable than an estimate made later.

A caution worth repeating: not every expense connected to being an athlete is a business expense. Training, equipment you use for your sport, meals, and clothing are often personal even if they show up in your content. Whether a particular cost is deductible depends on the facts and on the records that support it.

Reconcile regularly

Once a month, or at least every quarter, compare your tracking sheet to your bank and payment app activity. Make sure every NIL payment is recorded, every product received is listed, and every expense has a receipt. This is also the moment to update your estimate of taxes owed.

When tax forms arrive in January and February, compare them to your records. If a Form 1099 shows an amount different from what you recorded, find out why before you file.

How long to keep records

The IRS explains that how long to keep records depends on the situation. In general:

• Keep records for 3 years from the date you filed the return, for most situations.
• Keep records for 6 years if income that should have been reported was not, and it is more than 25 percent of the gross income shown on the return.
• Keep records indefinitely if a return was not filed, or if a fraudulent return was filed.

Contracts that continue for several years, and records for property you own and use in NIL work, may need to be kept longer. Many people simply keep NIL records for at least seven years.

Protect what you store

These records contain sensitive information. Use a strong password and two-factor authentication on the storage account, share access only with people who need it, and do not send Social Security numbers or full account numbers through ordinary email or text.

How this fits into ongoing support

Setting up a record system is often one of the first things we do with a new athlete, and keeping it current is part of the ongoing work. The aim is that at any point in the year, you can see what you have earned, what you have spent, and what you may owe.