When young athletes come into money, here’s why they need expert tax advice and the inflationary world of child care has Americans struggling to balance work and family. And as always taxes.

Episode Transcript

Intro:

Welcome to the Practical Tax podcast, with tax attorney Steve Moskowitz. The Practical Tax podcast is brought to you by Moskowitz, LLP, a tax law firm.

Disclaimer:

The information contained in this podcast is based upon information available as of date of recording and will not be updated for changes in law regulation. Any information is not to be considered tax advice or legal advice and does not form an attorney/client relationship. Further, this podcast may be construed as attorney advertising. You should see professional consultation for your individual tax and legal situation.

Chip Franklin:

All right. Well, welcome to another edition of Practical Tax, with tax attorney Steve Moskowitz and Chip Franklin. Steve, this has always intrigued me and that is the athlete that comes into a lot of money when he has never had any money in his life.

Steve Moskowitz:

Oh yeah.

Chip Franklin:

I know, because you've done a lot of sports shows. You and I have talked about this in the past and you've talked about luxury taxes and all, but this is something that really touches me. I had a long talk once with MC Hammer about what he went through and all the money he lost. I knew Dexter Manley, you might remember that name from back in the old Washington football team days, and he lost it all, and others. It's always broken my heart because it's difficult for these kids. They bring along everybody they grew up with and everything and they try to give to everyone and then it's gone. I think that's just so sad. Joining us right now is Ali Siam. He is a sports agent who has a lot of experience in this. He's negotiated more than a dozen or so NFL contracts and he's nice enough to join us on Practical Tax. Ali, welcome the show. Say hi to Steve.

Steve Moskowitz:

Hi. How are you?

Ali Siam:

Hi, how you guys doing today? Thank you for having me.

Chip Franklin:

There's a lot in the news, obviously, every year as the different drafts happen. There was a kid on my street who signed a deal with Tampa Bay. He was the 28th pick in the draft in baseball. Here, in Southern California, that happens a lot. He got three-and-a-half million signing bonus, but he's 18, so now he's going to be playing against the best people he's never seen. When he was in high school, he was the best player in the county. Now, he's just another guy. Fortunately, he has a father that will help look out after it. Let me ask you both, and let me start with you, Steve, when we look at this kind of income coming in, how many people are really prepared for that?

Steve Moskowitz:

Almost nobody. Here's problem number one, when the guys get it, they're really young and they don't realize that the life of a professional athlete is nowhere near the life of most other jobs, and that is a job. You get beaucoup money up front and you spend it, but the problem is most other professions, you wouldn't blink an eye when say how long you would be working. With an athlete, a lot of athletes are finished in their 20s, maybe into their 30s. What other position do you know of that you say, "Oh, 40, are you kidding? 50?" How many football players can only play a couple of seasons because they get injured so much? So, the bottom line is, basically, if I was talking to somebody like this, I'd say, "Look, let's take a look at this contract and figure this is the money you're going to get for a lifetime. So, you're 21 years old, let's say you have another 60 years to go or so, let's divide this and see how much we're getting here."

And then what I do is I make it practical, I say, "Look, we're not going to save every penny. Here's a portion of percentage, just blow it. Have a good time, have fun," but it's a percentage. The problem with these guys is they think they're always going to be getting this next contract and they blow it all. So, my advice is, just like a diet, you know what? You can have your cheat day, but every day can't be the cheat day. So, the bottom line is you got to put the money away. Pensions are really important for their... Number one, it's going to reduce their taxes and you can have a tremendous pension contribution, because although these guys are young, their expected professional life here is very short. You also have to be careful with their investments, because a lot of them, they get some idea, "Hey, go ahead and invest in this restaurant chain and you're going to be very wealthy." What works out for a few guys, a lot of guys, they lose their shirts in these investments.

Chip Franklin:

80% of restaurants fail. There's so many things that they need help with. Ali, what has your experience been with... Obviously, it's so exciting, I would imagine, to sign these kids to a contract with their dream. But obviously, you and others must have some trepidation they're just not ready for it. What's your experience?

Ali Siam:

I've seen pretty much everything in my eight years in the industry in the financial investment and post-career planning of it. I think it all goes back to how the kids were raised originally, because as Steve was saying, the average lifespan of the NFL players only four years. In most other careers, your peak earnings come about 10 years after you get your degree or at out of college. But these guys, it happens so quickly and so fast, and the money brings the power. These guys, most of them come from difficult upbringings, whether it's single parent or not as financially wanting as they want, so they want to give back to their families and they want to give back to their friends.

But if you're listening to your mom and dad your whole life and then you start to buy them a car and a house, and then something comes up, do you think your mom and dad are going to get in your face as much as they were prior to that? No, because they're enjoying the lifestyle, too. Everyone thinks it's going to keep going and it's never going to stop until that freak injury or until that rough moment that wasn't expected.

Steve Moskowitz:

That's another thing, too, so many of these football players, it's not the catastrophic injury that puts them in a wheelchair, it's the accumulation of injuries where now, a few years later, they really have a difficulty doing any job. Because I know football players have that 20-minute problem where if you have certain injuries, you can't stay in any one position more than 20 minutes. You have to stand 20 minutes, sit 20 minutes, lay down 20 minutes, most jobs can't accommodate that.

Chip Franklin:

You know what I've read? This was a few years ago and I found it incredible, that the NCAA will not allow a college basketball player to seek financial assistance based on what they might make, because they consider that to be some sort of collusion with the people that might pay them. So, you get a kid, whether it's a one-and-done, or a kid in his junior year it looks like they might be drafting to the NBA, he wants to go, and he wants to be able to figure out, obviously, a contract of 5 million and 7 million over a certain period of time and they want to get all that information before they actually sit at the table, they're not allowed to do that. When I heard that story and I asked a couple other people...

The other story that I wanted to say was I ran into an NFL player once and I went up to him and I said, "Oh, I used to love to watch you play," this is going to break your heart. We talked for five minutes and he goes, "Hey, man, I'm short. Anyway you could lend me $20?" I just met this guy and I was like... And he was a star, I'm not going to say his name. But when I see that, it's just heartbreaking.

Ali Siam:

Heartbreaking.

Steve Moskowitz:

One of the things that I have a major problem with, and I've talked a lot about this on TV and on radio, is that I think it is absurd that these colleges basically have these athletes in slavery. These kids make a ton of money for the school, not to mention the fact they are risking their bodies because you know what? You can get a catastrophic injury in college and now you can't do anything anymore. I feel that these kids should be getting fair market value for their services, just like any other service that you do. I've talked about that repeatedly on TV and radio. This is grossly unfair to these athletes and I think these athletes should be paid fair market value. They're going to risk their bodies, get paid for it.

Ali Siam:

And so many of them conceal their injuries from their coaches and from their teams-

Steve Moskowitz:

They have to.

Ali Siam:

They know if I tell the coach that I'm hurt, they're going to find someone else right away, so I'm going to have to hide this, and what's that going to do for everybody? It happens over and over and over. They keep saying it's for the benefit of the athlete, we're here to help you-

Steve Moskowitz:

It's for the benefit of the school that is using them. That is slavery.

Ali Siam:

Every jersey sale of a college athlete should be put into some type of account, so when they graduate, they get a percentage of that. Before NIL times, I'm saying, of course-

Steve Moskowitz:

I wouldn't wait till they graduate, I'd pay them now. That athlete can go work in the school bookstore for nothing. Well, he's on the field, not to mention the practice field, not to mention, again, there's a lot of injuries, that athlete should be getting paid right now. If they did that, that would do away with the guys that take what's illegal now and are getting paid from somebody. If you're getting paid honestly, why would you do something dishonestly? And then you wonder sometimes you see some scandal, somebody did something they shouldn't, you wonder why.