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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. That’s ridiculous. These guys should be getting paid.
Chip Franklin:
I think this is great to have the two of you together, because this is a young kid that’s coming out of high school that can throw 100 miles an hour or that can throw a football 80 yards with precision or can dunk a basketball, he needs both of you. He needs somebody to represent him and he needs somebody to explain to him the numbers.
Steve Moskowitz:
He needs a good friend that’s not going to rob him and take advantage of him.
Chip Franklin:
Well, that too, obviously. But Bobby Bonilla, if you don’t know that story, Bobby Bonilla signed a deal that defrayed payment, but it actually ended up giving him millions more. I don’t know what Bobby Bonilla Day, I think it comes along in, is it June, Ali?
Ali Siam:
I think it’s July 1st.
Chip Franklin:
Every July 1st, he gets 1.2 something million dollars and he’ll get it through 2035, if I’m not mistaken.
Ali Siam:
Correct.
Steve Moskowitz:
Not so awful.
Chip Franklin:
But it was obviously somebody that had the combination of both of your acumen that looked out for him and that got him this deal in these billion dollar businesses. Did you know that Steinbrenner bought the Yankees for $3 million and it’s worth 100 billion plus today? The kids that have made these guys billionaires, they need this advice. I’ve got another question for you, Steve, and maybe you can help with this too, as well, Ali, income averaging. I remember once I met, in the early ’80s, Arte Johnson. You won’t remember him, Ali, you’re too young, but Steve, do you remember from Laugh-In, Arte Johnson?
Steve Moskowitz:
I used watch from my crib.
Chip Franklin:
We were talking and he was saying, because I was performing at the time, I was doing standup comedy in Florida, and he said, “We need income averaging, because we’ll have two or three good years and then four or five not so good and we get screwed. They take all these taxes.” Steve, obviously there must have been some kind of push for this, this kind of income averaging would help these-
Steve Moskowitz:
Income averaging Schedule G, repealed many, many years ago. There used to be something in the federal taxes where you could take your earnings this year… I still remember filling out the form, Schedule G. It was so long ago I filled it up by hand. You could take this year’s earnings and average it out over the past four years. That was perfect for what you just said and that was repealed a long time ago.
Chip Franklin:
I don’t know. I read somewhere where 50% of the people that win big in the lottery lose about 80% of it over the next five, six years, and it’s because we’re just not money smart. I don’t know what it-
Steve Moskowitz:
Well, first they spend it, and forgive me for being in tax attorney, they don’t think of the taxes. So, if you go on a spending spray and you spend more than your part of it, all of a sudden, now you can’t even pay your taxes. There’s been story after story after lottery winner that they’re quickly broke again. Sometimes they’re even worse off, because now they have a big tax bill they have no idea how they’re going to pay.
Chip Franklin:
Ali, can you negotiate a Bobby Bonilla deal for a new athlete that just signs a contract?
Ali Siam:
Not for the rookie contracts. For the first four or potentially three to five years for the first rookie contract, you cannot. But the second contracts of guys, you can get a little bit more creative. I don’t know if it’s going to go to the level of the Bobby Bonilla, but there is some flexibility, I know, as far as how much money you can get up front with the signing bonus. Sometimes the deals are stacked more in the front end, sometimes they’re stacked more in the back end. But I’m pretty hands-on with my clients and not only their career on the field, but off the field, as well.
One of the things I tell to them all the time is if you have a financial advisor and he tells you to put your money here, ask him, “Are you putting your money in here, too?” If he’s not putting his money where he’s telling you to put your money, then that’s one thing right there. Have good advisors around you who are involved with these types of things and who have success themselves, because when push comes to shove and you’re paying off your mom, your dad, and your best friend, no one’s going to confront you at those times that you really need the confrontation.
Chip Franklin:
Well, Ali, this is great stuff. Obviously, it’s sad, but also, there’s a good lesson here for the parents. If you have a child that’s 12 years old, 13 years old, start thinking about that stuff right now if you think they have an opportunity to perform at that level. Please stay well and come back with us again.
Ali Siam:
Absolutely. Thank you.
Steve Moskowitz:
Thanks so much.
Chip Franklin:
Thank you again. That was fascinating. I knew you’d appreciate that, Steve, because I know how strongly you feel about it and I’ve heard you speak about it in the past. What’s the first thing I should do if I get an audit notice from the IRS?
Steve Moskowitz:
Call 888-TAX-DEAL. That’s 888-T-A-X-D-E-A-L. 888-TAX-DEAL.
Chip Franklin:
But I haven’t done anything wrong. Everything’s fine.
Steve Moskowitz:
It doesn’t matter. One of the things that I’ve talked about, and I’ve talked about it so frequently on in your radio show, you could be the most innocent person in the world or maybe you’re somebody that, upon reflection, you’ve done some things you wish you hadn’t, but when you think of an audit, you think of a boxing ring. The guy in the boxing ring is professional boxer, and a heavyweight too, nobody but another heavyweight professional boxer better getting the ring with him. If you’re the tough guy at the local bar, don’t be foolish enough to get in with that professional fighter, he’ll kill you. That’s what that IRS auditor is. He or she is that heavyweight professional boxer and they’re there to win. An audit is a contest, you’re there to win. We’re there to win, so is the IRS guy.
Chip, I’ve dedicated my professional life to this and so have the attorneys of our firm. Tax is so complex, you read the cases, the judges disagree with each other, the courts are split. How in the world could a regular guy climb in a ring with professional boxers? Put up your dukes, come on. You need to know all of your rights. Another thing that people need to know is that auditor is not judge, jury, and executioner. If you disagree with him or her, which we do frequently, or you think they’re wrong or they haven’t cited the cases in your favor, because with the tax cases, if you look at a lot of different areas, can I deduct tax, you can see a bunch of cases where the answer is yes, you can. You’ll see a bunch of cases where the court says, “No, you can’t.” Well, the auditor is not there to tell you about the cases that favor you. He or she is there to win, so are we, never forget that. You should be represented, it’s very important.
Chip Franklin:
I’ve been there twice and everything he’s saying is true. Steve is dead on there, if you get audited, call 888-TAX-DEAL. That’s just not a pitch, just call somebody, but this is the best group to call. So, our next guest, Steve, this is something that is a real problem across this country. I found 72% of families in the United States are spending at least 10% of their income on childcare. This exceeds the US Department of Health and Human Services affordability threshold of 7%. So, it’s by 3%, that’s a huge difference. 51% of parents say they expect to spend at least 20% on childcare. Nobody tells you that when you’re having sex.
Steve Moskowitz:
Usually, you’re not interested in anything else, Chip.
Chip Franklin:
Joining us right now is Natalie Boyle. She is a childcare expert at mommiesinneed.org and nice enough to join us here, Steve Moskowitz, our tax attorney and myself, Chip Franklin. So, Natalie, just how dire is it for these families out there?
Natalie Boyle:
It is a really tough situation. The truth is the childcare system has been difficult for families for a very long time, but the pandemic just really worsened things. So, as we’re coming out of that, it’s just been very difficult, something that was already hard. First of all, there just aren’t enough childcare slots. If you find one, it’s very, very expensive and difficult for a lot of families to afford.
Chip Franklin:
Steve, I saw a survey that childcare costs in California can exceed $3,300 a month. Is there any sort of relief for these families? I remember there was legislation at some point that got shot down about trying to help low income or moderate income families. If you’re spending $3,300 a month, you’re not a poor family, but that’s going to help you get there.
Natalie Boyle:
Yeah.
Steve Moskowitz:
There are certain tax benefits for childcare, but the problem is this is all part of our general inflation and expenses. And then people start adding up, well, wait a minute, how much do I have to earn that’s even worthwhile to work? This could be an area, perhaps, if there’s something that you could work from home, you don’t have to have the childcare, but a lot of people can’t. There’s a lot of jobs where you have to show up. If you are a waiter or a waitress, you have to show up, you can’t do that remotely, and a lot of other jobs where you have to show up. If that’s the case, obviously, I think that more should be done. Employers could do more, they could set up areas for this, which would be good. I know there’s some major companies that have done that and that’s actually an incentive for certain people at workplace to go, “Not only does the company have childcare, but I can run and see,” their kid. If that’s not the case, then these things have to be negotiated. Also, there are certain tax benefits you can take.
So yes, you can lower the taxes, but the problem again is people are getting squeezed so much. I remember when I was a boy, everybody was middle class. What part of the middle class? There were a few rich people, there are a few poor people, but almost everybody was middle class. I looked at the news reels and the movies and I’d see all these foreign countries, they had a small wealthy class and a big poor class. I said, “Boy, I’m sure glad it’s not like that in the United States.” Unfortunately, there’s a lot of middle class that have slipped down and now everything is so challenged. I saw something where, on the news just the other day, that some people are going into the supermarket and they only can afford to buy meat once a month. Come on, this is America. Not to mention all the people that they just can’t afford their normal living expenses.
Chip Franklin:
Natalie, you do you guys remember that viral video of the dad trying to do a Zoom call and the kid runs in? Everybody loved it because it was adorable, but my guess is is that corporations don’t have that kind of sensibility, in general, because they look at childcare as that’s your problem, you figure it out, is that course, is that true?
Natalie Boyle:
It’s interesting, I think that that is the view of a lot of companies, but I think what we’re seeing is that trend, and what you did mention earlier, is that employers are starting to look at, well, wait a minute. What is my ROI if I actually do invest in childcare centers?” It’s one of those things where I think the trend is changing and particularly, because of the workforce environment that we’re in right now, where we can’t find enough people to work, and a huge part of that is childcare. So, a lot of, particularly women, of course, wound up leaving their working environments because they couldn’t find or afford childcare. And so, to entice them back into the job market, providing that either onsite childcare or some places are doing childcare stipends or things to help that. There’s a ton of studies that show that they can reduce turnover by 35 to 60% by providing onsite childcare.
Chip Franklin:
Wow.
Steve Moskowitz:
As an employer, I can tell you that really goes to the bottom line.
Natalie Boyle:
Yep.
Steve Moskowitz:
Replacing people is expensive in time and money and training until they’re up to speed.
Chip Franklin:
Plus, that builds in loyalty, doesn’t it, to the company?
Natalie Boyle:
It does. Well, think about your children are the thing that’s most precious to you. If you know your kids are happy and they love their preschool and your preschool, you only get to go to because that’s your job, you are so much more likely to do that. Not only that, but women are a lot more likely to come back from maternity leave. Because think about if you’re able to go down and feed your baby during your lunch break, if you’re able to interact with your kids, it also creates a really thriving community at that job place. So, it’s the loyalty, it’s the community, and then it’s just the dollars and cents of it.
Steve Moskowitz:
The one more thing is the fact that the person is there if something happens.
Natalie Boyle:
Absolutely.
Steve Moskowitz:
If Mommy is three floors above you, even if Mommy only comes down at lunch, if you do fall down and sprain your knee, Mommy is three floors away, Mommy be here in a couple of minutes.
Natalie Boyle:
Absolutely.
Steve Moskowitz:
Mommy knows, too, hey, if I just saw some picture somebody showed me and I want to go hug my kid, you can go and do it./p>
Chip Franklin:
Back in the day, I grew up, my mom was a single mom, five kids, three-bedroom apartment, but the neighbors all looked out for each other. I think that there was only two or three people on our block that had a dad at home, so the moms would, if I came home early from school or if I was sick, somebody would come and check on me. It was a community. I don’t know what happened to that.
Steve Moskowitz:
Those were back in the days when you could actually walk home alone and it was okay.
Chip Franklin:
Some areas you still can.
Natalie Boyle:
People are so mobile now. You used to live in the community where your family was, but a lot of people are relocating for their jobs and so they don’t have the chance to build up that community, and so it makes it much harder.
Chip Franklin:
I love the name of your organization, because I’m sure you kicked it around, Mothers in Need. No, Mommies in Need. Why did you choose Mommies? I think I know the answer, but I go ahead.
Steve Moskowitz:
I like Mommies.
Natalie Boyle:
Thank you. Well, the reason we started is, so our organization, we are there to provide childcare so that families can access healthcare. My personal journey was that I was going through cancer treatment when my twins were 18 months old.
Steve Moskowitz:
Oh my God.
Chip Franklin:
Jeez.
Natalie Boyle:
It was horrible. But what I learned from that is that I was really lucky. I had my family nearby, I had the ability to afford a nanny, but a lot of people didn’t have that. We started Mommies in Need to make up that deficit for families when they’re going through those kinds of health issues. The reason we picked Mommies is because most of our kids that we serve are those little babies, they’re the tiny ones, they’re vulnerable. What we’re doing is we’re stepping in and being that extra set of hands while Mommy is sick and she’s not able to be that, but we do serve fathers and grandparents and everything else. But historically, the reason we picked the name Mommies is because it’s recognizing the young age and the vulnerability of the children that we’re taking care of at that place.
Steve Moskowitz:
Whole different feeling.
Chip Franklin:
Steve, you have some tremendous women that work with you and I know a few of them. It’s interesting to see just how difficult this is, childcare falls on the whole family, but in particular, the mother and that balancing act. I just wonder, I don’t want to go too far with this politically, because both parties have had an opportunity to do more and they haven’t, but it seems to me, you mentioned ROI and Steve, I’ll ask you this first and you next, Natalie. Would we see the numbers if we invested in this like so many people think we should, Steve?
Steve Moskowitz:
I think it would be good a investment.
Natalie Boyle:
Yeah. So, I actually have a couple statistics about that, which is that they found that any investment into the childcare system nationally has about a 13 to 1 ROI and that the US actually loses about $57 billion a year because of loss of wages, productivity, because of the childcare crisis. So, it is a serious amount of money that we’re talking about, not just the family’s overall wellbeing, but also, for the good of country.
Chip Franklin:
I just love kids. I love just over the years as my kids grow up and coaching them and hearing the stories. When we lived in Washington, DC, we lived in an area that was border aligned to apartments, a lot of single parents. Many times, the kids would never ride home because their parents had to work late. The rules of the league said I wasn’t allowed to drive them home. Of course, my wife would and my wife came along just because, as you can imagine, whatever, trying to avoid the crazy world we live in today. It seems to me, at some point, that this is something that local, state, and the federal government should look at as a tremendous investment. But the tax-wise, Steve, we talked about the ROI. Obviously, they see that. Is there something that the families that do, that have to put this money into looking after their kids, the tax laws that would give them a solid deduction so they could deduct a large percentage of this, if not all of it?
Steve Moskowitz:
It would be so easy for Congress, with a stroke of a pen, to just go ahead and provide that. So much can be done in the private sector. It’s not that the government has to do things for us, but it’s the payment. People are so squeezed right now, with a small legislative change, that could make all the difference in the world. But Congresspeople are, again, we won’t get political, but there’s an awful lot of people that disagree with the politicians are doing. I bet you if you took a survey of most Americans and they said, “What do you think if Congress went ahead and changed the tax laws so that you could better care for your kids?” I bet most Americans would say, “Right on.”
Chip Franklin:
Well, I say right on. Natalie, thank you so much for your time. I appreciate you hanging on in the background here.
Natalie Boyle:
No problem. Thanks for having me on.
Steve Moskowitz:
Thanks. Bye-bye.
Chip Franklin:
Be well. Again, that was Natalie Boyle, mommiesinneed.org. Got to love that. Steve, another great show. Thank you so much for your insight. I know it means a lot to these people, especially in areas that people don’t immediately see the connection to taxes. We’ve said many times, it’s all intertwined.
Steve Moskowitz:
It’s all intertwined.
Chip Franklin:
You be well. Thank you, my friend.
Steve Moskowitz:
Thanks so much. Take care. Bye-bye.
Chip Franklin:
Tax attorney, Steve Moskowitz. I’m Chip Franklin. This is Practical Tax. See you next time.
Outro:
Thanks for joining us on the Practical Tax podcast with tax attorney Steve Moskowitz. To hear more and view more podcasts, go to moskowitzllp.com/practicaltax.