ESPN reported in August that Heisman Trophy winner Johnny Manziel “…agreed to sign memorabilia in exchange for a five-figure flat fee during his trip to Miami for the Discover BCS National Championship.”

Of course the real fear for Texas A&M faithful was that he would lose his eligibility to play football for violating NCAA Bylaw 12.5.2.1 dealing with “Advertisements and Promotions After Becoming a Student-Athlete.”

In late August, however, we learned from the NCAA that it did not have evidence that Johnny Football received money in exchange for autographs “…based on currently available information and statements by Manziel.”

However, as the saying goes, where there is smoke there is fire.  For purposes of this post, let’s hypothetically assume that Johnny Football really did take cash “under the table.”

If so what does that mean for him from a tax perspective?

Section 61 of the Code says that gross income consists of all income, from whatever source derived, unless specifically excluded.  Compensation for personal services is certainly income under this rule.

What should he do at tax time?  Report the income or keep up his story that he never got anything?

He is stuck between a rock and a hard place.

If he fails to report his income on his return, then he has just committed a crime.  Willfully filing a false tax return is a felony that can net you three to five years in jail depending on the charge.

But reporting the income on the tax return could be an admission that he violated NCAA rules.

Between the two, if I were him, I would chose not to violate federal law.  But, Johnny Manziel would probably be a Texas A&M pariah if he caused hardship to his university.  He might even lose his Heisman Trophy.  Maybe someday there will be an ESPN “30 for 30″ film exposing the meteoric rise and the thunderous fall of “Johnny Football.”  As Tom Brady eloquently said about Manziel, “[i]f you’re a turd, it’s going to come back to you.”

On the practical side, I would guess that IRS audit “flags” have been raised.  The IRS would love to get a high profile person like Manziel because it would serve one of their goals of deterring others from similar activity.  It would certainly get big press.

I would not be surprised if both Johnny Football and the autograph brokers get audited.

Eventually someone is going to talk.  And it is probably going to be the autograph broker(s).  Johnny Football should properly report his income so that he does not become a convicted felon like Pete Rose or Daryl Strawberry.  Both of these men are convicted felons for failing to report income for autograph signings.