3
4.
The second form of payment to sales representatives is
net earned commissions. Earned commissions are calculated
on a policy-by-policy basis as premiums are paid by
policyholders. Earned commissions are applied in the
following order: (1) to recover outstanding loans in the
form of advance commissions; (2) to reimburse Primerica Life
for advanced business expenses such as license fees, etc.;
and (3) to cover outstanding loans that have been charged to
the sales representative's account ("chargebacks"). Net
earned commissions credited during any calendar year to a
sales representative's account are reported to the IRS as
income on Form 1099-MISC.
Ms. Wilson further stated that "the obligation to pay commissions
attributable to the sale of MILICO insurance products was the
responsibility of MapleLeaf Insurance Services" (MapleLeaf).
Petitioner testified that upon selling an insurance policy,
he received an immediate advance equal to a percentage of the
premiums due on the policy and was entitled to keep this amount
if and only if the policy was held by the insured for a minimum
of 7 months. According to Ms. Wilson's affidavit, the advances
were intended as loans, and there was an unconditional personal
obligation on the part of petitioner to repay the advances either
with the future commission, credited to his account after the
relevant 7 months elapsed, or out of his personal funds. The
advances were not reported by MapleLeaf to the IRS as income on
Form 1099-MISC until the 7 months elapsed, and petitioner had an
unconditional right to the funds or their equivalent.
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Last modified: May 25, 2011