The digital age has spawned numerous successful companies and industries. One industry that did not exist ten years ago is online auctions, such as those on eBay. A company that sprung up to facilitate payment transfers for eBay is PayPal. In fact, eBay bought PayPal a few years ago.
The benefits of using PayPal are obvious—buyers and sellers can easily transfer money to one another. The money flows readily. PayPal can also be used to transfer money from the US to anywhere. And the IRS wants to know about that.
The US has some very stringent money laundering laws. If you have a foreign bank account, and you have $10,000 or more in it at any time during the year, you must report it on Schedule B of Form 1040 and by filing Form TD F 90-22.1 with the Department of the Treasury. Now, do you really believe that all of the people who use PayPal to transfer money have been doing this?
I don’t, and the IRS concurs. Indeed, the IRS announced last year that they were looking at PayPal payments. Yesterday, the IRS won approval in federal court to obtain information on Americans who sent money to bank accounts or credit cards in thirty foreign countries considered tax havens.