April 13, 2006 10:11 AM PDT

IRS to search PayPal records for tax evaders

A federal court has granted the Internal Revenue Service permission to search PayPal members' offshore bank accounts and credit card records to identify possible tax evaders.

Under the order, issued by a U.S. District Court judge in San Jose, Calif., the IRS can view those records under certain conditions, the Justice Department announced this week. The IRS is seeking the access as part of its larger Offshore Credit Card Program, which aims to crack down on U.S. taxpayers who hold money offshore to avoid paying taxes.

The IRS is seeking information on U.S. taxpayers who have signature authority over bank and credit card accounts issued by, or through, financial institutions in more than 30 countries. The foreign countries, which range from Bermuda to Costa Rica to Singapore, have bank secrecy laws that allow account holders to refrain from disclosing income and assets that are subject to federal income taxes in the U.S.

PayPal currently operates in 10 of those countries, including Costa Rica, Singapore, Hong Kong, Switzerland, Malta and Luxemburg.

According to the order, the IRS can review the bank and credit card accounts of PayPal members, providing they meet three stipulations.

One is that a "reasonable basis" exists for believing a person may have failed to comply with IRS laws. A second requirement is the investigation relates to a particular person. Furthermore, the information being sought must not be easily obtained through other sources.

The Justice Department, on behalf of the IRS, filed its petition with the court in October. The court issued its order in February. A department representative said the law enforcement agency did not choose to disclose the court's actions until this week during a press briefing.

Online payment service PayPal, which is owned by eBay, has since received a summons order from the IRS and is reviewing its options, said Amanda Pires, a PayPal spokeswoman.

PayPal, which received the summons roughly two weeks ago, is reviewing whether to provide the information, appeal the court order, or take some other action, Pires said.

She noted the online payment service has had a long working relationship with regulators and that its privacy policy states it may release members' information if required by law.

The company, however, takes a strong view on protecting users' information, she added.

Over the past several years, the IRS has been turning to the Internet to crack down on tax evaders. In 2002, the IRS sought ways to track potential tax evaders by reviewing keywords in their search results.

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5 comments

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The Internet Has No Geography
My government is so great and brilliant that they have helped me make a better financial decision for myself and my family. Now I will do no more USA shopping (since I'm a USA citizen). Instead, I can have my stuff shipped from overseas or from offshore in order to avoid taxation. If I purchase in a large enough bulk, I save on shipping costs..

The idiots in my USA governments (that's plural, because the idiots are from the city, county, state, and federal government) do not understand that the Internet has no geography. I can be like two clicks away from shopping in India than I can in Texas. Before the Internet, we purchased items locally because of convenience. Governments around the world took advantage of that and charged taxes to help those communities (and the Federal and State/Province governments as well). People were ensnared by this. The only way around it was to travel to somewhere else where the taxes were cheaper. But after the Internet, I have no geographical constraints. I can circumnavigate the globe in seconds.

No need to get angry at the knuckledraggers, though. We can just show them what happens when they continue to make brilliant decisions like this.
Posted by supermikenews (3 comments )
Reply Link Flag
That's clear thinking...
Wow, now the logic behind not paying taxes is to use the Internet to shop offshore. And then we'll whine when we have Internet use taxes to replace the sales taxes and income taxes we try to evade. Let's not support our local and domestic merchants who are providing jobs to our friends and neighbors so we can evade taxes because after all we don't need any of the services provided by the government. Great thought process.
Posted by drfez (15 comments )
Link Flag
Thank You republicans voters for bringing us...
...another step closer to total totarian dictatorship!!! Why don't you make it official and vote republican again this year, and then it'll be offical that we no longer have rights!!! God, it isn't like we weren't warning you of what a one party system would bring to this country if you choose to ignore the principals of checks and balances and voted against your own self interests just to prevent the "homosexuals from marrying". Now you have to live with this nightmare of a government gone awry, but you have dragged us who didn't vote for these people with you... thanks!
Posted by MisterFlibble (207 comments )
Reply Link Flag
zero sense
...another step closer to total totarian dictatorship!!! Why don't you make it official and vote republican again this year


Just a little contradictory, huh?
Posted by dewalt25 (57 comments )
Link Flag
Congrats, you have been selected for audit
What did you think? your tax evasion will go unpunished. Hope your paypal account name isnt the same
Have a nice day from the IRS
Posted by mssoot (169 comments )
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