Nobody is talking about this — but they should be.
Sixty-eight percent of first-year NIL earners failed to make a single quarterly estimated tax payment in 2023, according to a 2024 survey by the National Collegiate Players Association. That is not a typo. More than two-thirds of college athletes who got paid for the first time in their lives handed the IRS a loaded pistol and went about their business. The bill arrived in April. It always does.
Here is what the numbers tell us: the NIL era did not just change how athletes get paid. It changed what kind of taxpayer they became overnight. And most of them had no idea.
The Valentine’s Day That Cost One Athlete $4,200
Picture this. February 14th, 2024. A Division I wide receiver — we will call him Damon — opens a letter instead of a card. It is from the IRS. The number at the bottom: $4,214. That includes the original tax owed, a failure-to-pay penalty, and the underpayment penalty on top of it. Damon earned $19,000 in NIL deals that year. He spent almost every dollar. He did not know about Form 1040-ES. His school never told him.
He is not the exception. He is the majority.
Why the Myth Exists
The confusion starts with a belief baked into how most of us first experience income: somebody else handles it. A W-2 employer withholds your federal taxes, your state taxes, and your FICA contributions before the money ever touches your account. The check arrives already processed. Clean.
A 1099 contractor? That is you. All of you. You receive the full amount. No withholding. No processing. No backstop. The IRS expects you to calculate what you owe, divide it into four quarterly payments per year, and send those payments on time — in April, June, September, and January.
When did your school last sit you down and walk you through what a 1099 means for your bank account? If the answer is never, you are in the statistical majority. The loophole was not malicious. It was structural. Universities built compliance offices around eligibility rules, not tax education. By the time NIL arrived in July 2021, there was no infrastructure for the financial reality it created.
Warning: Missing a quarterly estimated payment does not just mean you owe at tax time. The IRS charges a penalty calculated daily on the amount you should have paid. In 2024, that rate was 8% annualized, per IRS Notice 2024-08. A $5,000 underpayment held for nine months costs you roughly $300 in penalties alone — before the base tax is even touched.
Marcus vs. Damon: A Tale of Two 1099s
Marcus L. played on the same team as Damon. Same conference, same NIL market, similar earnings: $22,000 in deals during his sophomore year. Different outcome entirely.
Marcus had an uncle who ran a small contracting business. That uncle sat Marcus down before he signed his first deal and said five words: “Set aside thirty cents minimum.” Marcus opened a second checking account the same week. Every NIL deposit triggered an automatic transfer of 30% to that account. He touched none of it.
In April, Marcus filed his taxes and owed $5,100. He paid it in twenty minutes from the savings he had already set aside. Then he moved the leftover $1,500 back into his spending account and went to dinner.
Damon took out a personal loan.
Do you know what bracket your NIL income pushed you into? Because the difference between a 22% and 24% marginal rate on $22,000 of self-employment income, plus the 15.3% self-employment tax that replaces the employer-paid FICA split, is not a rounding error. It is the difference between manageable and catastrophic.
By the Numbers: Self-employment tax alone costs athletes 15.3 cents of every dollar earned up to $168,600 (2024 IRS threshold). Add federal income tax at the 22% bracket and a state like California at 9.3%, and Marcus and Damon were each looking at an effective combined rate near 46 cents per dollar on their top NIL income. Over a four-year college career, the athlete who understood this structure kept an estimated $11,000 more working in their favor through proper deduction planning. That is not a rounding error. That is a car.
The Self-Employment Tax Nobody Warned You About
Here is the layer that catches almost everyone. On a W-2, your employer pays half of your Social Security and Medicare taxes. You pay the other half — 7.65%. You never see the employer’s half because it never passes through your hands.
On a 1099, you are the employer and the employee simultaneously. You pay both halves. All 15.3%. On top of your income tax.
Did you receive a 1099 last year and skip the quarterly payments? Run the math right now. The IRS already has.
This is why athletes earning $15,000 in NIL deals sometimes owe more at tax time than they expect from a 22% bracket alone. The self-employment tax adds a floor of $2,295 on that $15,000, before federal income tax begins. Combined, the total owed can approach $5,500 or more depending on state. On $15,000 earned. The math is not forgiving.
Did You Know: The IRS allows self-employed individuals to deduct 50% of their self-employment tax from gross income before calculating income tax owed. This deduction is automatic and does not require itemizing. For an athlete who earned $20,000 in NIL income, this single deduction reduces taxable income by roughly $1,413. Most first-year 1099 filers miss it entirely because they file without a CPA.
What the Smart Athletes Are Doing Differently
The athletes who came out ahead shared two habits. They separated money on arrival, and they found professional help before the first deal closed. Not after. Not in March.
A CPA who works with self-employed individuals can identify deductions that most athletes leave on the table: equipment costs, travel to appearances, a proportional home-office deduction for content creation. The right professional setup transforms a 1099 from a liability document into a planning tool.
Money arriving without withholding follows one rule regardless of source: structure early or pay later. That principle applies whether you are earning NIL deals, freelance graphic design fees, or flipping items for income — the tax mechanics are identical. Building smart money habits now also feeds directly into how well you manage larger financial decisions later, including understanding why your bond allocation may not be working as hard as you think as your assets grow. Structure now; invest smart later.
Is that fair for 19-year-olds who were never taught any of this? I will let you decide. But fair does not change the due date.
Pro Tip: Ask your CPA to set up a single-member LLC for your NIL activity before you sign your next deal. It takes one afternoon, costs roughly $50 to $150 in state filing fees, and separates your personal finances from your business activity. Deductions become cleaner, recordkeeping becomes cleaner, and if you are ever audited, the paper trail is already there. Athletes who received structured financial education before their first deal closed reported significantly better outcomes — not because they earned more, but because they kept more of what they earned.
Your Next 3 Steps
Step 1. Open a separate savings account today — not next week, today — and set up an automatic transfer of 30% of every NIL deposit the moment it arrives. Name it something unglamorous. “IRS Money” works. Do not touch it. This is not your money. It is the government’s money sitting in your account temporarily, and it earns you nothing if you spend it.
Step 2. Go to IRS.gov and search “Form 1040-ES.” Pull up the current year’s estimated tax vouchers and find the next quarterly due date. Put it in your phone calendar right now with a 7-day reminder set. If you missed a prior quarter, calculate what you owe using the worksheet on Page 6 of the 1040-ES instructions. The IRS will not send you a reminder. You are the reminder.
Step 3. Search your school’s athletic department website for NIL financial literacy resources. If nothing exists, which is likely, contact your compliance office directly and ask for a CPA referral with experience in self-employed athletes. If they cannot provide one, check the NFLPA or NBPA financial advisor registries, both of which list vetted professionals. Contact someone before your next deal closes. Damon called a CPA in May. Marcus called one in June of the prior year. Timing is the entire game.
The stat that changes everything is not the tax rate. It is the 68%. Two-thirds of athletes who earned NIL income in 2023 walked into April completely unprepared. You now know what they did not. The next step is entirely yours.
