Not spam: IRS squeezes customer data out of PayPal


If you're an avid email user, you may be used to the typical spam messages that look like they're from PayPal. Usually they begin with some dire security warning, saying you've been locked out of your account because there's been a hacking attempt. You're asked to reply with all sorts of personal information, including a social security number, a PIN number, and plenty of other private data. Hopefully, you didn't get sucked in by this scam.

But now is the time to pay attention if you get a certain PayPal email. This one's not a hoax, according to the hoax-busting website The email is to inform you that information about your account has been turned over to the IRS because of a court order requiring PayPal to do so.

A lawsuit started in 2006 in the Northern District of California has caused PayPal to turn over account information for taxpayers whose PayPal accounts are linked to bank accounts, credit cards, or debit cards from certain foreign countries. The IRS is on a fishing expedition to collect banking information related to countries known as tax havens. That is... it wants to know if you're banking overseas in order to avoid paying taxes in the U.S.

If you get this notice, it does not mean the IRS is investigating you. It merely means that your PayPal records were turned over to the IRS. If you are investigated, you'll be contacted directly by the IRS.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.