Over the next couple of weeks, many individuals here in Missouri will be tuning into the Summer Olympics (which kick off tomorrow) and rooting for our nation’s athletes to medal. Winning an Olympic medal is one of the highest honors in sports. Given current IRS rules though, this honor can lead to an American athlete facing a hefty tax bill from the Internal Revenue Service.
Among the things U.S. Olympic athletes generally receive if they earn a gold, silver or bronze medal in an Olympic event is bonus money. The amount of this bonus typically falls between $10,000 and $25,000. The bonus comes from the U.S. Olympic Committee.
This bonus money, like most forms of income, is taxable under current IRS rules. Federal taxes can eat up a fair percentage of the medal bonus, sometimes as high as 30 percent of the bonus.
The practice of taxing Olympic bonuses is something not all countries do. Some individuals here in the U.S. argue that the federal government should change it so that medal bonuses are exempt from federal taxes, in light of all the hard work U.S. Olympic athletes put into medaling for the nation. There is proposed federal legislation on this front.
Do you think the U.S. should stop taxing medal bonuses?
While Olympic medal bonus taxes are something the vast majority of Americans will never have to deal with, the tax illustrates a point that is broadly applicable to U.S. taxpayers. This point is that the list of things the IRS counts as taxable is very long, and includes things that a person might not immediately associate with the triggering of a tax liability.
Missing paying taxes on a given income source because they didn’t realize it was taxable is among the things that can lead to a taxpayer facing a surprise tax debt. A surprise tax debt can have big implications. So, when facing such a debt, a taxpayer may want to meet with a skilled tax lawyer to discuss the debt and strategies for addressing it.
Source: North Country Public Radio, “Won an Olympic gold medal? Expect a bill from the IRS,” Brian Mann, Aug. 3, 2016