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January 14, 2008

20080114-1.gifPayPal, the electronic remittance services, is complying with IRS summonses for customer records.

There are two things the IRS might be looking for. The obvious one, of course, is investigating whether vendors who accept PayPal have been reporting all of their income.

The other IRS goal may be more subtle. Some people who sell tax evasion scams accept PayPal. Finding the names of their customers could lead the IRS to the doorsteps of people who tried to use these scams to evade taxes.

Still, the summons is an awkward tool. Expect Congress to require PayPal and credit card companies to report remittances to the IRS electronically in the next few years.


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