Are PayPal Accounts Reported on the FBAR?

Your Guide to State, Local, Federal, Estate + International Taxation

When filing your Report of Foreign Bank and Financial Accounts (FBAR), you may not be inclined to report your offshore PayPal account. After all, PayPal accounts aren’t real bank accounts, right? Well, you may need to think twice about this question. According to John C. McDougal, a senior special trial attorney with the Internal Revenue Service Office of Chief Counsel, your PayPal account may be a reportable account under certain conditions.

Most importantly, how is the account used? If business is conducted through the account, it’s likely to be considered a financial account reportable on the FBAR. If the account only exists for personal use, it may be less likely to be considered a financial account. The location of the account is also considered to be a determinable factor.

This issue, as well as others relating to offshore account disclosure, was a key discussion during a forum in May 2015 that was sponsored by several sections of the American Bar Association. With the increased scrutiny and reporting requirements, these types of issues are important questions to be considered when large civil and even criminal charges and penalties may be assessed for noncompliance.

Ultimately, the Financial Crimes Enforcement Network (FinCEN) has the final say in what accounts are required to be reported. Perhaps these discussions will spur FinCEN to release clearer guidance on these particular types of accounts.

Please note this information is general in nature and should not be relied upon. Please consult with a qualified tax adviser for specific advice.

By Jill A. Helm, CPA