Not every client of an accountant has as much money as baseball star Alex Rodriguez, but the situation A-Rod faces illustrates the multiple considerations a CPA applies to helping people. Almost everyone benefits from a good accountant. A-Rod simply has more wealth attached to that benefit. Accounting expertise from courses for CPA study is valuable to a variety of individual financial circumstances. A-Rod needs plenty of assistance from a CPA along with an improvement in his hand-eye coordination.
After his benching during the playoffs, expectations have risen that A-Rod will play for a team other than the New York Yankees next year. Playing in New York City certainly gives ARod a high profile in baseball. But, it also presents a high income tax liability every year. Rumors are circulating that he could be playing next year in his hometown of Miami for the Marlins franchise. This possibility generates an opportunity to apply some aspects of accounting from CPA review courses.
Moving from New York to Florida is fairly common. The advantage for “A-Rod” is more than just the sunshine. He will save millions in state income tax. Florida doesn’t have any tax on income but the state of New York has a maximum rate of 8.8 percent. Adding to that is an income tax for New York City of 3.8 percent. The state and city tax calculations entail similar income categorization and deductions as federal tax rules from CPA exam study courses. But, an accountant handling tax reporting for an athlete has a lot more to address than income, deductions, and state residency.
Professional athletes pay income tax to the states where their games are played. Most states follow a uniform approach developed in the 1990s for taxing nonresident athletes. Understanding this system is necessary for preparing tax returns of ballplayers like A-Rod. So, his accountant will have tackled a little extra education in addition to remembering federal tax matters from studying for the CPA exam.
The uniform method divides the annual salary of a baseball player by the number of duty days. This is all dates a player is working for the team during a year, including spring training and playoffs. Most baseball players have about 210 duty days. The daily amount is then allocated to the number of duty days an athlete is working within each state. For baseball players specifically, a travel day when no game is played isn’t apportioned to any state. But the day still counts as a duty day.
Putting this in perspective for A-Rod, he earns about $140,000 per duty day. Some dates are travel days and some have games played in states with no income tax. Nevertheless, A-Rod pays a serious amount of income tax to various states. Plus, he has a tab with New York for home games – even when he’s not in the lineup.
Playing for the Marlins changes A-Rod’s tax bill substantially. Half of his games during the season plus all of spring training become duty days in a state without income tax. Over the five years remaining on his contract, A-Rod would save approximately $8 million of tax compared to staying in New York. He can also avoid the booing New York fans every time he strikes out, which is often. His accountant, however, must still utilize skills from CPA preparation and knowledge about state income taxes to conduct error-free work.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
Tags: courses for CPA, CPA exam study, CPA preparation, CPA review courses, studying for the CPA exam
