"Starting with the 2006 tax returns, the IRS has been auditing professional athletes to get proof of their sport related expenses. These would include agent fees, union dues, meals & entertainment, etc... They have continued to audit athletes for their 2007 tax returns and now have just sent out in October audits for their 2008 tax returns. I do not see the IRS stopping these audits anytime soon. These audits are called correspondence audits and are done all through the mail. Therefore you do not get a chance to talk face to face with an agent during the process. I would estimate that about 20% of athletes are being audited each year where as the average for the rest of the country is less than 2%.
The biggest problem I am seeing when going through these audits is that the players are not keeping the backup evidence necessary to get credit for their deductions. The IRS typically does not consider a credit card statement as sufficient backup. They also want to see a copy of the actual receipt/invoice for the purchase and as proof that the payment was made, either through a credit card statement or check copy. I have been recommending that my clients get a scanner and software to help keep better track of their expenses. That way after they scan the receipt they don’t have to worry about finding them when the IRS comes knocking.
The other issue I have seen is that the players only have 90 days to respond to the IRS before the case is closed and the tax is assessed. This can be difficult when the player gets the notice during their season and their mail may be going to an address where they do not get mail during the season. The worst thing they can do is to ignore any notices. These will not go away and they will put liens against your property or tax future tax refunds. This may also affect their credit.
One other thing to note; Cities and states are looking for revenue so I would expect an increase in audits from them as well."
