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IRS Gets Go-Ahead For PayPal Request

By: David Utter

The Internal Revenue Service began the process for obtaining information from eBay-owned PayPal on certain money transfers outside the US.

Last October, the IRS asked a federal judge in San Jose for permission to request customer records from PayPal, the online payment processing arm of e-commerce firm eBay (EBAY).

The IRS believes some PayPal-using taxpayers in the US have money stashed outside the country to evade taxes. Further, those evaders use payment cards issued by PayPal to spend that money once it is transferred into a PayPal account, AP reported.

"PayPal is another one of the mechanisms by which money stashed overseas might be spent," Eileen O'Connor, assistant attorney general for the Justice Department Tax Division, told reporters in California.

With its requests for information, the IRS believes it can identify tax cheats and the offshore accounts they use for tax evasion. The agency plans to review PayPal transactions from 1999 through 2004.

The report noted PayPal saw $27.5 billion move through its system in 2005, with about 100 million account holders. PayPal collects fees on various transactions, such as auction payments, and has proven a profitable acquisition for eBay.

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