[ADXA] ADXA Incorporation, PayPal & the IRS

[w5zn at w5zn.org]

ADXA Folks,

You will recall just after the first of the year we requested a halt to 
using PayPal for your membership renewal, owing to the fact that PayPal 
(and all monetary companies) are being forced to adhere to the new IRS 
law that any transactions over $600, regardless of the transaction type, 
must be reported to the IRS. PayPal requested that ADXA provide our tax 
ID number to them so, at the end of each calendar year, they could 
provide ADXA with a form 1099 indicating the total distribution to us 
via PayPal. It is then the recipients (ADXA) responsibility to comply 
with whatever tax may be required. ADXA doesn't owe any tax, our income 
is from membership dues and not any business activity. Of course, PayPal 
does not know this and is simply complying with the new law. The federal 
government late last year delayed implementation of the new law for a 
time while companies prepared to comply however those that had already 
established procedures to do so moved forward with the new requirement.

I'll restate that ADXA will NOT owe any tax, however in order for PayPal 
to comply with the new law, if we do not provide a tax ID number once 
the transfer distribution from PayPal to ADXA hits the magic $600 mark, 
PayPal will be required to automatically withhold 24% of the 
distribution amount and send it to the IRS! ADXA is not the only amateur 
radio club impacted by this new rule, there are others.

In order to avoid the automatic withholding, ADXA will need to obtain a 
tax ID number however before we can apply we must be incorporated. ADXA 
has never been formally incorporated. Several radio clubs are, including 
my local club in Searcy. The ADXA Board of Directors has discussed this 
at length and unanimously decided to formally apply for non-profit 
corporation status. ADXA VP Pat, W5VY, is leading this effort with 
assistance from Dawn, N5QT, who handled the NCAARS filing. There may be 
some minor changes to our Articles of Association required for the 
incorporation. If that is required it will be discussed at our March 
meeting. Once the incorporation is complete, we can then file for a tax 
ID number, provide it to PayPal, and once again be able to conduct 
transfers.

I want to emphasize that ADXA will NOT owe any tax. There may be a 
minimal amount of annual filing required to comply with all of this new 
BS, and we will adhere to any new laws.

Stay tuned and we'll keep you updated as things move forward.

73 Joel W5ZN
ADXA President
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