Example: [Collected via e-mail, January 2008]
Dear (NAME REMOVED),
PayPal has received a summons from the United States Internal Revenue Service requiring us to produce various account records, including data related to your PayPal account. PayPal understands the summons relates to the IRS' offshore compliance program in which the IRS has sought information about offshore credit card accounts from a number of companies.
Your privacy is extremely important to PayPal. PayPal is obligated, however, to turn over the requested data. PayPal has been ordered by the
If you have any concerns about the disclosure of this information, you should consult with your tax or legal advisor. You may have rights in connection with the summons, including the right to seek to prevent the IRS from obtaining some or all of the information. The statute of limitations that limits the time in which the IRS may assert tax liabilities against you may be suspended beginning on the date which is six months after the IRS served the summons upon PayPal and continuing until PayPal finally resolves its response to the IRS. See 26 U.S.C. § 7609(e)(2).
PayPal cannot provide you with legal advice. If you have questions concerning the summons and court order, we encourage you to contact the IRS, your tax advisor and/or your attorney.
If you wish to contact the Internal Revenue Service regarding this matter, they can be reached at (215) 516-4777.
The PayPal Legal Team
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:
"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
Lashmar, Paul. "PayPal Names Names as IRS Chases Tax Evaders." The Independent. 6 November 2005. Associated Press. "IRS Seeks PayPal's Aid Finding Hidden Cash." USA Today. 11 April 2006.