How are signing bonuses taxed? | HFBoards - NHL Message Board and Forum for National Hockey League
Toggle sidebar

How are signing bonuses taxed?

Ragamuffin Gunner

Ragamuffin Gunner

Lost in the Flood
Aug 15, 2008
34,742
8,289
Boston
With the talk about taxes being such a huge advantage now that FLA made the finals again, I'm reminded of something I heard or read a few years ago about bonuses. I can't remember where it was to confirm (maybe Walsh or Burke on a podcast?), but I remember them saying that signing bonuses that are paid out on July 1 are taxed according to where the player lives, not where the team is located.

Their example was Matthews pays Arizona taxes on his 10 M+ signing bonus on July 1 and Toronto taxes only apply to his 900k base salary.

Can anyone confirm this? If it's true, then it really throws a huge wrench in the whole argument.
 
  • Like
Reactions: avocadosmoothie
Depends on the state and country as to how signing bonuses are taxed. Otherwise it's all just revenue to be reported to the various tax agencies.
 
  • Like
Reactions: cptjeff, Voight, The Devilish Buffoon and 1 other person
Ragamuffin Gunner said:
With the talk about taxes being such a huge advantage now that FLA made the finals again, I'm reminded of something I heard or read a few years ago about bonuses. I can't remember where it was to confirm (maybe Walsh or Burke on a podcast?), but I remember them saying that signing bonuses that are paid out on July 1 are taxed according to where the player lives, not where the team is located.

Their example was Matthews pays Arizona taxes on his 10 M+ signing bonus on July 1 and Toronto taxes only apply to his 900k base salary.

Can anyone confirm this? If it's true, then it really throws a huge wrench in the whole argument.
Click to expand...

  • If a signing bonus is guaranteed and not contingent on future performance, some jurisdictions may treat it differently — sometimes allowing it to be taxed only in the player’s residence.
  • But most tax authorities (especially in the U.S.) still consider it part of earned income spread across the season.

This is what chatGPT said. Seems if the AI machine is right, it would still hurt the NY Rangers for example.
 
  • Like
Reactions: Voight and avocadosmoothie
What's the wrench and hidden advantage you are implying?

The Laffs for example, still had to overpay for Tavares/Matthews/Marner in addition to paying most of their salary in signing bonuses, so i don't understand. Matthews is the only one of those guys who makes his residence in the US anyway.

E: could be wrong about residency
 
Last edited:
Filthy Dangles said:
What's the wrench and hidden advantage you are implying?

The Laffs for example, still had to overpay for Tavares/Matthews/Marner in addition to paying most of their salary in signing bonuses, so i don't understand. Matthews is the only one of those guys who makes his residence in the US anyway.
Click to expand...
Pretty cynical response unless the poster has a history of said accusation.

IMHO, he is asking the question...if it is a gotcha then I'll take it back. I always wondered as well.

We hear conflicting reports constantly. Is there an actual accountant on here that can answer for us?

Thanks in advance.
 
What ever is paid July 1st is paid at the players listed residence. Matthews for example is correct.

barriers said:
There have been disagreements

www.sportsnet.ca

Canada Revenue Agency disputes Leafs captain John Tavares' argument in tax case

The Canada Revenue Agency is disputing a claim by Toronto Maple Leafs captain John Tavares that the USD $15.25 million the team paid him in 2018 was a signing bonus, saying that that the amount was effectively a form of salary and should be taxed at a higher rate.
www.sportsnet.ca www.sportsnet.ca
Click to expand...
Tavares partially got screwed because when he signed his bonus, he apparently listed his residence as New York, when in fact his residence was legally Toronto at that time. Things that the CRA looks at is if you have ties to Canada as a way to legally define you as a resident and in turn tax you. Tavares apparently listed he had a home and other things in Toronto, so the CRA wants their cut. They aren't arguing against his later bonuses just his signing bonus.
 
  • Like
Reactions: cptjeff, MoneyManny, Beukeboom Fan and 2 others
DistantThunderRep said:
What ever is paid July 1st is paid at the players listed residence. Matthews for example is correct.


Tavares partially got screwed because when he signed his bonus, he apparently listed his residence as New York, when in fact his residence was legally Toronto at that time. Things that the CRA looks at is if you have ties to Canada as a way to legally define you as a resident and in turn tax you. Tavares apparently listed he had a home and other things in Toronto, so the CRA wants their cut. They aren't arguing against his later bonuses just his signing bonus.
Click to expand...

I mean with all due respect, did you even read the article in the post you quoted?

The CRA's beef with Tavares wasn't over a clerical thing and listed residence, their argument was that his signing bonuses were really a salary and should have been taxed as Income @ Canadian rates.

Also, if I understand correctly, Matthews and any other guy employed by a Canadian team would still have to take out 15% of his signing bonuses for the CRA. A lot of savingsvs it was normal base salary, but it's still a decent amount.

----

At the end of the day, with how complex taxes and finances can be and not having intimate details of players lives and other finances/factors and their contracts, no one can really give clear definitive answers.

You'd need advisors and lawyers who works with these guys to really shed light on this imo.
 
Last edited:
  • Like
Reactions: Beukeboom Fan
Filthy Dangles said:
I mean with all due respect, did you even read the article in the post you quoted?

The CRA's beef with Tavares wasn't over a clerical thing and listed residence, their argument was that his signing bonuses were really a salary and should have been taxed as Income @ Canadian rates.

Also, if I understand correctly, Matthews and any other guy employed by a Canadian team would still have to take out 15% of his signing bonuses for the CRA. A lot of savingsvs it was normal base salary, but it's still a decent amount.

----

At the end of the day, with how complex taxes and finances can be and not having intimate details of players lives and other finances/factors and their contracts, no one can really give clear definitive answers.

You'd need advisors and lawyers who works with these guys to really shed light on this imo.
Click to expand...
They argued it was a part of the salary because he was considered a Canadian Resident. The issue was he was arguing he wasn't a Canadian Resident at the time of the signing bonus, and it shouldn't be considered as a part of his salary. Its this weird semantics issue with the CRA vs Tavares. It basically is the slippery slope for all Canadian teams and Professional Athletes. Its why a bunch of Baseball players are now getting targeted too.

The ways to avoid a lot of taxes for professional athletes is the RCA. It can effectively lower your tax rate to less than 35% from what I have heard. Some people like Walsh said the RCA can lower your tax rate to 20%, I don't think its that low, but it is generally agreed it can lower it below the federal rate in Canada. It was so advantageous the NBA banned the Raptors and the Grizzlies from offering it to players.

The key for a lot of these players to not have ties in Canada while playing for a Canadian team. Even if you are a Canadian, as dumb as that sounds. Its a lot easier obviously if you are Canadian and play for an American team. Hypothetically, a Canadian player on Calgary can own a home in Florida, and spend the whole off season down there, but never actually own a home in Calgary, just rents or gets housing "provided by the team". Not own a car in Calgary. Have an American Bank Account. American Credit Card. Apply for American Dual Citizenship. That would give the said player the argument that any bonus could be taxed in Florida rather than Canada, and any Canadian burden can then be lowered by RCA. This is obviously very basic and stupid way to look at it, since like you said its ridiculously complicated. But on the surface, I tend to believe that Billionaire owners and franchises give Millionaires access to the best tax lawyers and accounts on the planet to pay the least amount they physically can. Access to information and people that us poor plebs will never have, and see a contingent of fans argue for millionaires to save more money.
 
  • Like
Reactions: cptjeff, qcal1427, Armourboy and 1 other person
I essentially did the same thing as these guys when I was working in Georgia for a while. I kept listing my parents house as my residence in Tennessee, drivers license was Tennessee, car registration was Tennessee and even though I had a bank account in Georgia it was with a nationwide back, and I also had one in Tennessee. The only thing that tied me to Georgia was my rental apartment and the job itself.

At the end of the day it meant I saved a bunch on state taxes as the rates were different for out of state workers.
 
  • Like
Reactions: Mrfenn92 and DistantThunderRep
Filthy Dangles said:
What's the wrench and hidden advantage you are implying?

The Laffs for example, still had to overpay for Tavares/Matthews/Marner in addition to paying most of their salary in signing bonuses, so i don't understand. Matthews is the only one of those guys who makes his residence in the US anyway.

E: could be wrong about residency
Click to expand...
I honestly have no idea what you're talking about.
 
Ragamuffin Gunner said:
This is what I'm asking. Basically, it doesn't matter where you play as much as where you live for bonuses.
Click to expand...
Also depends on your citizenship. The problem with Tavares is that he was tie-broken from Canada and therefore didn't owe money to Canada, but as soon as he signed a contract with Toronto, he unbroke his tie, especially since he intended to reside in Toronto. So as of the signing of his contract he owed taxes to Canada.

The reason why Matthews is able to do what he does is because the majority of his taxes are owed to the US. So when he files both of his tax returns (as he must) he only pays the higher portion of due tax burden and doesn't get double-taxed.
 
  • Like
Reactions: DistantThunderRep
Ragamuffin Gunner said:
This is what I'm asking. Basically, it doesn't matter where you play as much as where you live for bonuses.
Click to expand...
Generally, on the surface level. Obviously its very complicated, but if we look at it at a very basic level, then residency is key factor number 1. This doesn't take into account write-offs, international tax treaties, etc...

One wild deep dive if you care to do, look for some articles on how Shohei Ohtani's contract and deferral of salary effects his taxes with the State of California, Federal tax in the States, and Japanese Tax.
 
The wrinkle and the headache is that the OP's argument is merely the claimed status of the player and the player's representation and his tax attorneys. That doesn't stop revenuers in the city/province/state in which the player works from trying to get hold of related taxes, sometimes well after the fact. This has happened with Ontario and/or Canada tax officials. They've gone after Tavares and nothing says they couldn't go after Matthews.

So it would be accurate to say that this is still in dispute.
 
DistantThunderRep said:
What ever is paid July 1st is paid at the players listed residence. Matthews for example is correct.


Tavares partially got screwed because when he signed his bonus, he apparently listed his residence as New York, when in fact his residence was legally Toronto at that time. Things that the CRA looks at is if you have ties to Canada as a way to legally define you as a resident and in turn tax you. Tavares apparently listed he had a home and other things in Toronto, so the CRA wants their cut. They aren't arguing against his later bonuses just his signing bonus.
Click to expand...

I think there are some conditions on the bonus that the cra is scrutinizing which they argue is salary rather than bonus.

So even if he successfully declares himself as a non resident, then i think there is a 2nd fight whether the conditions on his bonus are salary rather than inducement.
 
  • Like
Reactions: DistantThunderRep
I guess they hire some bean counters to cost them as little as legally possible using every loophole
 
Bank Shot said:
  • If a signing bonus is guaranteed and not contingent on future performance, some jurisdictions may treat it differently — sometimes allowing it to be taxed only in the player’s residence.
  • But most tax authorities (especially in the U.S.) still consider it part of earned income spread across the season.

This is what chatGPT said. Seems if the AI machine is right, it would still hurt the NY Rangers for example.
Click to expand...

Yes, I believe Matthews saves a ton because the majority of his salary is a signing bonus and hes a resident of Arizona so he pays state and federal tax on it there vs the significantly higher Ontario/Canada taxes.
 
Beukeboom Fan said:
This is the important part. I am a CPA, but tax law varies by jurisdiction and the details are incredibly nuanced. That is why speaking in generalities can be misleading.
Click to expand...
Very much depends on each player's situation. What citizenship they hold, where they officially reside, are they changing teams on this contract (ala Tavares), etc.

Tax Expert will require all of the details to provide advice on how the tax authorities are likely to view the contract and SB.
 
  • Like
Reactions: Beukeboom Fan and Summer Rose
You must log in or register to reply here.

Users who are viewing this thread

Total: 1 (members: 0, guests: 1)

Latest posts

Ad

Ad

Top Bottom