Are football coaches drawing the ire of the IRS?


As our New York readers know, college athletics is a big business. While the athletes themselves are not paid — at least if they want to maintain their eligibility — athletic departments at big schools are essentially multi-million dollar businesses. In particular, football often brings in the lion’s share of revenue for many schools.

As a result, major college football coaches are paid handsomely for their efforts. With that level of compensation comes an expectation to be competitive; coaches who aren’t successful are quickly shown the door, with others never far away to take their place.

Not surprisingly, many coaches who are hired for big school jobs come from other big schools; after all, nothing breeds success like success. In fact, last year, 11 big-time coaches left their jobs for other, similar — often better — positions at other schools. Many, if not all, of these coaches, had substantial buyout provisions in their contracts. That means they were on the hook for a collective $7 million to their outgoing employers.

In these cases, the new school covered the amount of the buyout — more than $1 million in at least one case. This has generated some tax controversy: the amount of the buyout could be considered as taxable income to the coach. However, the schools are taking care of the tax obligation themselves.

Experts say that the issue could come to a head if the Internal Revenue Service decides to pursue the coaches for the funds. However, to this point, it has not done so. It remains to be seen what action, if any, the agency will take.

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