As a pilot, I got my base salary but missed out on...
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Returning Member

As a pilot, I got my base salary but missed out on extra money we count on because we didn’t fly due to slow business and Covid 19. Do I qualify for the Cares Act?

I’m down $15,000 vs the same time last year? Working overtime and making flight duty pay was really down during Covid. Do I qualify for the Cares Act, by taking money out of my 401k?
7 Replies
Level 15

As a pilot, I got my base salary but missed out on extra money we count on because we didn’t fly due to slow business and Covid 19. Do I qualify for the Cares Act?

See: https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-...

 

Q3. Am I a qualified individual for purposes of section 2202 of the CARES Act?

A3. You are a qualified individual if –

  • You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention;
  • Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention;
  • You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19;
  • You experience adverse financial consequences as a result of being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19; or
  • You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19.

Under section 2202 of the CARES Act, the Treasury Department and the IRS may issue guidance that expands the list of factors taken into account to determine whether an individual is a qualified individual as a result of experiencing adverse financial consequences. The Treasury Department and the IRS have received and are reviewing comments from the public requesting that the list of factors be expanded.

 

 

Here is the exact wording of the tax law as passed by Congress (I highlighted paragraph I-III):

 

 

IRC §2202(A)

(4) DEFINITIONS.—For purposes of this subsection—
(A) CORONAVIRUS-RELATED DISTRIBUTION.—Except as
provided in paragraph (2), the term ‘‘coronavirus-related
distribution’’ means any distribution from an eligible retirement
plan made—
(i) on or after January 1, 2020, and before
December 31, 2020,
(ii) to an individual—
(I) who is diagnosed with the virus SARS–
CoV–2 or with coronavirus disease 2019 (COVID–
19) by a test approved by the Centers for Disease
Control and Prevention,
(II) whose spouse or dependent (as defined
in section 152 of the Internal Revenue Code of
1986) is diagnosed with such virus or disease by
such a test, or
(III) who experiences adverse financial consequences
as a result of being quarantined, being
furloughed or laid off or having work hours reduced
due to such virus or disease, being unable to work
due to lack of child care due to such virus or
disease, closing or reducing hours of a business
owned or operated by the individual due to such
virus or disease, or other factors as determined
by the Secretary of the Treasury (or the Secretary’s
delegate).
(B) EMPLOYEE CERTIFICATION.—The administrator of
an eligible retirement plan may rely on an employee’s
certification that the employee satisfies the conditions of
subparagraph (A)(ii) in determining whether any distribution
is a coronavirus-related distribution.

 

 

Returning Member

As a pilot, I got my base salary but missed out on extra money we count on because we didn’t fly due to slow business and Covid 19. Do I qualify for the Cares Act?

Thanks for the response critter. I have read the IRS information. Just curious if my circumstances would pass the IRS eye test. I was “adversely” effected. Adverse means to cause harm, acting against. My situation I wasn’t starving but my salary was effected due to flying being slow. Just wanting to get peoples thoughts on if I would qualify. The language is vague but we all know the IRS interpretation can be different then ours.

Level 15

As a pilot, I got my base salary but missed out on extra money we count on because we didn’t fly due to slow business and Covid 19. Do I qualify for the Cares Act?

You have to make that determination for yourself ... when you sign your return you are attesting to it being true and correct.  

Returning Member

As a pilot, I got my base salary but missed out on extra money we count on because we didn’t fly due to slow business and Covid 19. Do I qualify for the Cares Act?

Maybe I have confuse you Critter. What I’m stating is correct. I’m down $15000 vs last year due to flying being slow. All those are factual. I’m not misrepresenting myself. I just think the language from the IRS is very vague. In my opinion I would qualify but I could see them saying my above information isn’t enough. Understand? I wouldn’t lie about this or anything else for that matter. I’m essentially looking for people who are experience in the tax world what their thoughts are. Thanks 

Level 15

As a pilot, I got my base salary but missed out on extra money we count on because we didn’t fly due to slow business and Covid 19. Do I qualify for the Cares Act?

It is vague so you will have to make your own decision on this matter.  If you can stand in front of the IRS auditor  and convince them that a $15K reduction  in your annual pay was a hardship then go ahead and use the rule.  I don't know what your situation is so I cannot comment on it.  If your annual salary is $200K and you lost the extra $15K of overtime is that really a hardship ?   It may be if you count on it to pay your regular bills.  But if it just means you could not buy a new car this year or take a vacation then I would say no it was not.     

 

 

  • You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19;
Returning Member

As a pilot, I got my base salary but missed out on extra money we count on because we didn’t fly due to slow business and Covid 19. Do I qualify for the Cares Act?

Thanks for the input. Since the IRS didn’t put a dollar amount on the hardship it is definitely up for interpretation. The word “adverse” per Webster’s dictionary states “acting against, opposed to one’s interest, causing harm”. Covid did work against my salary and caused harm to my salary when comparing last year’s salary. Once again no dollar amount is listed so “standing in front of an IRS agent” is a bit dramatic.

 

Base on the information they have given by the letter, I’ve been harmed financially by Covid 19.  Does it matter it’s $15,000 or $150,000. If it’s for paying bills or buying a car, once again doesn’t matter per the letter. Just like the bullet point stating you qualify for the cares act if you couldn’t work because of lack of child care. Once again no dollar amount has to be attained. Plus how would they verify you’re information that you couldn’t find daycare?!? It so vague it makes me wonder how seriously they will look at this. It is my money, I’ll be paying taxes on it. Just not the 10% early withdrawal penalty. 

 

I did talk to a Turbo Tax expert and she agreed without a doubt that I qualified. She said it doesn’t matter that my base salary was intact, Covid interrupted my bonus pay that I normally would of gotten if it wasn’t for Covid. I’m not for sure what direction I’m going to go. Still debating and would recommend everyone to investigate this very carefully before deciding. Thanks for you’re insight.

Level 15

As a pilot, I got my base salary but missed out on extra money we count on because we didn’t fly due to slow business and Covid 19. Do I qualify for the Cares Act?

Again ... I said it is up to you to interpret the law based on your circumstance. It will be interesting how many people will ever be audited on this matter ... however that is the yardstick to use ... can you defend your position if audited. 

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