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Claim: PayPal has e-mailed notices stating that they will be providing user account information to the Internal Revenue Service.
Example: [Collected via e-mail, January 2008]
Origins: Many PayPal users received an e-mailed notice like the one quoted above at the beginning of 2008 and were justifiably skeptical about it, because spoofing messages from PayPal is a common scheme employed by scammers. However, this notice is not part of a phishing attempt or some other scheme to steal funds by cracking PayPal accounts; it's a legitimate advisory to PayPal users that some of their account details will be provided to the Internal Revenue Service (IRS).
Back in 2006, the IRS won approval from a federal court to ask PayPal to turn over account information for American taxpayers who have bank accounts, credit cards or debit cards issued by financial institutions in various foreign countries — sites commonly used as tax havens by persons seeking to evade taxes through hiding income in offshore accounts. The current notice was sent to PayPal customers to advise them that the company would be providing some of their account information to the IRS in response to that agency's summons:
The request for information is an outgrowth of an IRS effort, begun several years ago, to trace money that American taxpayers hold offshore to avoid paying taxes. The IRS said many of those taxpayers access their money through credit and debit cards. The tax collectors have already obtained information from some credit card companies, merchants and payment processors.Receipt of this PayPal notice does not necessarily mean that the account holder is under investigation by the IRS; merely that some details related to the account have been (or will be) provided to the IRS. In the case of any IRS investigation regarding taxes, that agency will contact the account holder directly.
"PayPal is another one of the mechanisms by which money stashed overseas might be spent," Eileen
In some cases, the IRS obtained credit card numbers but could not identify the cardholder. The IRS said PayPal might be able to lead the tax agency to those individuals.
The IRS also hopes PayPal can help them identify currently unknown taxpayers and their payment cards, as well as offshore bank accounts, that might be evidence of tax evasion.
The IRS has asked a federal court for permission to serve a "John Doe" summons on PayPal as part of a clampdown on tax evasion using offshore credit and debit cards. The IRS petition says: "The records requested in the summons will identify the holders of bank accounts at, or payment cards issued by banks in, the listed jurisdictions."
Last updated: 6 January 2008
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