Reciprocity Evaluation

A professional athlete may work in more than 20 states in a year, which creates a tax compliance nightmare for the athletes.  Although the team may withhold a portion of the athlete’s paycheck for each tax jurisdiction in which games are played, the withholding frequently does not take into account the reciprocal agreements between states.

Reciprocal agreement are agreements between states to not tax nonresidents who work in a state but reside in the other state.  Paying close attention to reciprocal agreements between states may allow a professional athlete’s income to be taxed at reduced rates if their state of residence has a lower tax rate than the state in which income is allocated under the duty days or games played method.  ETA’s tax professionals analyze each client’s income allocations and the multitude of state reciprocal agreements to ensure that the income is taxed at the lowest income tax rate possible.