To remove your email from the subscriber's list, please follow the instructions on the email.

The Tax Prophet Newsletter   Issue # 29 November, 2005

REDUCE TAXES!
CHECK OUT THE TAX PROPHET'S Action Guides


In This Issue:
Introduction
No Paper Trail
Money Laundering?
John Doe Summons


Tax Evasion Through PayPal?

Introduction

Are tax cheats using PayPal, the internet money-transfer arm of eBay, to commit tax evasion? Apparently, the IRS is suspicious about U.S. taxpayers with off-shore accounts using PayPal to cheat the government out of taxes. PayPal has approximately 76 million accounts, which makes it larger than American Express, and is available throughout the world.

No Paper Trail

Unlike the banking system which has detailed paper trails, PayPal customers can buy goods from eBay and many other shopping websites, pay for them from untaxed income held offshore and get the goods sent to their home address. By accessing these records, the IRS is hoping to trace U.S. residents who have undeclared income in offshore bank accounts, and who are using these funds to pay for goods online and have them shipped to their home address.


Money Laundering?

IRS is demanding records of customers using PayPal through offshore accounts in all tax havens, including Jersey, Guernsey, Isle of Man, Gibraltar and other UK dependencies. Also, PayPal can be used to "launder" untaxed money between an individual's offshore and domestic accounts. Since money transfers can occur between bank accounts through e-mail, money can be moved from foreign to domestic accounts via e-mail and without the participation of the banking system.


John Doe Summons

IRS is asking a San Jose federal judge for access to eBay's PayPal customer records as part of a nationwide probe to determine whether taxpayers are using offshore credit card accounts to evade paying income taxes. The complaint said the investigation spans from Jan. 1, 1999, to Dec. 31, 2004.

To investigate potential tax evasion, IRS has asked a federal court for permission to serve a "John Doe" summons on PayPal. In court, IRS contends "The records requested in the summons will identify the holders of bank accounts at, or payment cards issued by banks in, the listed jurisdictions." The objective is to identify the purchasers using offshore accounts (credit and debit cards) through PayPal.



Home | Who We Are | What's New | Search | Contact Us | Subscribe

| [Tax Class] | [Hot Topics] | [Estate Planning] | [Employee Stock Options] | [Tax & Trust Scams] | [Foreign Taxes] | [Tax Columns] | [Tax Publications] | [Tax Hound] | [Interactive Apps] | [Cyber Surfing] |
All contents copyright 1995-2005 Robert L. Sommers, attorney-at-law. All rights reserved. This newsletter provides information of a general nature for educational purposes only and is not intended to be legal or tax advice. This information has not been updated to reflect subsequent changes in the law, if any. Your particular facts and circumstances, and changes in the law, must be considered when applying U.S. tax law. You should always consult with a competent tax professional licensed in your state with respect to your particular situation. The Tax Prophet is a registered trademark of Robert L. Sommers.