Meanwhile, the professional golfers' tax attorneys are doing their jobs, trying to convince the IRS that the players' endorsement money was properly reported as royalty income, not payment for personal services.
The difference is important.
Personal services income is for wearing logo apparel, appearing in advertisements and making appearances for the sponsor at events.
The rest of the money is royalties, essentially payment for the professional athlete's image and reputation.
And, according to tax treaties the U.S. has with the United Kingdom, where Goosen lives, and Switzerland, Garcia's official country of residence (of course for tax purposes), royalty income is not taxed.
Guess how the two golfers classify most of their earnings? You got it, as royalties. And they are arguing that because of the distinction, they don't owe the IRS as much as the agency claims they do.
The IRS wants an additional $165,000 in taxes and $33,000 in penalties from Goosen for endorsement income he earned in 2002 and 2003.
Garcia's situation could be more costly if the IRS prevails. Tax officials here say he owes Uncle Sam $1.72 million in back taxes for 2003 and 2004. No penalties have been assessed … yet.
Tax lawyers say that whatever the court decides, it will be precedent setting.
- PGA Tour golfer John Daly in tax trouble
- British taxes drive off sports stars
- European golfers push Britain to change tax law
- The shared tax troubles of rich athletes and telecommuters
- Tiger tales, taxes and divorce
- Golf car credit controversy
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