"Adverse financial consequences" and commission-based employees | Ed Slott and Company, LLC

"Adverse financial consequences" and commission-based employees

In determining whether or not someone is CRD-qualified by virtue of "adverse financial consequences", how should one look at, say, commission-based (sales) W-2 employees?

Even if they have not been furloughed or laid-off, they may be suffering adverse financial consequences because:

a.) their state has instituted a shelter-in-place or stay-at-home order (does that count as a "quarantine"?); and
b.) they have been unable to conduct face-to-face meetings with clients, and as a consequence, their sales have dropped off considerably.

The language of CARES doesn't seem to address such a situation squarely, but did Congress intentionally exclude it as an "adverse financial consequence" (i.e., a pandemic-related disruption in sales is a risk that a commission-based employee undertakes when accepting the position), or is this situation meant to be included, as part of the "spirit" of the Act, and just wasn't properly covered in the hastily-drafted language?

I don't think the IRS has addressed this issue (yet). Assuming I am right, I guess I am looking more for learned opinions here.

Please and thank you!

You are correct. This is another situation that meets the spirit for a CRD, but like a reduction of pay was not specifically addressed.  Stay at home orders do not qualify as a quarantine, but this situation appears to be one that the IRS will grant relief for, once they finally get around to releasing regulations. This continued delay on IRS part is frustrating, since many people probably need to tap retirement plans now and may be tempted to gamble on the release of broader qualification guidance and/or additional stimulus bills. I hope the IRS does not intend to wait for the next stimulus bill before releasing guidance.

Thank you.  Yes, I work with a lot of folks who are commission-based as described above, and they ask me if they are allowed to take a CRD under current conditions.  While I always preface my answer with the disclaimer that I cannot give tax or legal advice, I share the sentiment that Congress did not deliberately intend to leave these people "out in the cold," so to speak.  As you noted, some folks don't want to hang their hat on a "probably," though.  Thank you again!

See p 5 of Notice 2020-50 attached. This Notice should provide CRDs to these commission based employees. https://www.irs.gov/pub/irs-drop/n-20-50.pdf

 

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