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UPDATED: NOVEMBER 2007 110

INCOME EARNED

COMMISSIONS, BONUSES AND SIMILAR PAYMENTS

Policy: Commissions, bonuses or other amounts paid on the basis of superior performances, sales made or goals accomplished are considered earned income and the amount paid is verified.

References: SSL Sect. 366.2(a)

Dept. Reg. 360-4.3

ADM

92 ADM-32

Interpretation: The situations in which commissions, bonuses, royalties and other similar payments are made vary considerably. The A/R may be paid under a commission only, salary plus commission, guaranteed minimum commission or draw against future commissions. The commissions may be a percentage of sales price or a flat amount per unit sold.

Royalties are payments such as remuneration to the holder of a patent or copyright for the use of an invention or the duplication of a writing, or to the owner of a mine for the extraction of a product such as oil, gas or minerals. In the event that the A/R has incurred expenses in generating the commissions or royalties such as promotional literature, samples or costs for transporting customers, the expenses are verified and deducted from the amount of the commissions to obtain the gross earned income. Some employed persons are paid bonuses based upon individual or group achievement, production, sales goals, or employer profits. These may be paid annually or more frequently. When commissions, bonuses, royalties or similar payments are paid less frequently than monthly, a decision as to how to treat such payments is based on the category of the A/R.

(MRG)