A closer look at Garcia and Goosen's tax battles

One of the more interesting aspects of tour player taxes, which I wrote about in Golf Digest's "Money Clip" column this month, is the debate over their endorsement income. Governments classify some of this money as "personal services" and some of it as "royalty" income. They're taxed differently.

Retief Goosen and Sergio Garcia are both fighting IRS rulings about this right now. The IRS argues that the two international stars have underpaid their U.S. taxes by counting too much of their endorsement income as royalties.

How much? A U.S. Tax Court filing for Goosen (attached here) shows the IRS wants nearly $160,000 in back taxes for 2002 and 2003--plus almost $32,000 in penalties.

Garcia's numbers (here) are significantly higher: The IRS claims he owes $1.72 million for 2003 and 2004. Any additional penalties go unmentioned in Garcia's petition to the court.

Lawyers for both golfers argue that they calculated their taxes properly and that the IRS is in error.

-- Peter Finch