The IRS is attempting to find some foreign credit card holders who used PayPal to evade taxes. According to this story in the San Jose Mercury News, the IRS wants to find tax evaders who are using PayPal to illegally transfer money. The IRS estimates that $40 billion in tax revenues are lost because of foreign credit card schemes.
If you have a foreign bank account, and it has $10,000 at any time during the year, you must report the bank account on both your tax return (by checking a box on Schedule B) and by submitting a Form TD F 90-22.1 to the Treasury Department by June 30th of the following year. Be forewarned, the IRS is looking into this area.
The current IRS investigation covers 1999 through 2004.