Doofus said:
Most professional athletes are required to file tax returns for each individual state they play games in, even if they are not residents of that state. (A Baltimore Oriole has to pay taxes to New York when he plays in Yankee Stadium, for example.) Plenty of athletes have gotten into trouble over this issue.
Now as for Jeter's residency, for the normal person it is defined as the place where you spend more than half your days per year, regardless of travel. However, I suspect that the New York taxing authorities are interested in Jeter because he probably spends more days per year in New York than in Florida, negating his claim on Florida residency.
Genesis of the jock tax
The nonresident tax is nothing new. The Tax Foundation, however, says it took on a new life in 1991 when the Chicago Bulls beat the Los Angeles Lakers in the NBA Finals -- and the state of California decided to go after a piece of Michael Jordan's income. The Tax Foundation report says that Illinois decided to retaliate the following year by levying a jock tax of its own, dubbed "Michael Jordan's Revenge" in the press.
The tax was applied only to players from states that taxed visiting athletes, which at the time was only California. Today, according to the report, "of the 24 states that have a professional sports team, only four do not have a jock tax." In addition, a number of cities and other localities also have a jock tax.
This is how it works. A pro athlete can be liable for taxes in two primary states, the state where the team is based and the state of residency. They can make it easier on themselves by living in a state without a personal income tax -- which is why so many pros live in Florida.
When they travel with their team, they are also liable for taxes in states with a jock tax. These states calculate the number of "duty days" a visiting athlete spends there for a road game, then send a tax bill for a prorated piece of the athlete's annual income. There is no nationwide standard for calculating what constitutes a duty day.
Athletes claim these extra state-tax payments as credits in their home state to reduce their tax there. Theoretically, then, the jock taxes should not increase the overall tax burden, but because some states have higher tax rates than others, an athlete (or anyone subject to a nonresident tax) can end up paying more overall.
It also creates a complex compliance issue for players who must file returns in multiple states. "Most of our athletes are filing in anywhere from eight to 16 states," said Steven M. Piascik, president of Piascik & Associates, a Virginia accounting firm with a practice that specializes in working with pro athletes.
"Typically, they're not going to pay any more tax," said Piascik, who added that states are within their rights to collect the tax. "Overall, as I tell my clients, it's an administrative burden."
http://moneycentral.msn.com/content/Taxes/P112872.asp (Archive copy)
