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The honeymoon may be over for PayPal clients using their accounts to funnel money from offshore and avoid the Internal Revenue Service. A federal court in California granted the IRS permission to seek account information from the eBay-owned company.

The IRS' request covers PayPal transactions between 1999 and 2004, according to the Associated Press. The US tax enforcement agency is looking for Americans suspected of using foreign issued credit and debit cards in conjunction with PayPal accounts to launder money.

More specifically, the IRS has its eye on over 30 offshore financial institutions thought to be tax shelters. As reported in October by David Utter, the IRS contends that over $40 billion in tax revenue has gone missing - most likely in counties with lax money transfer regulations and bank secrecy laws preventing US investigations.

The IRS has already obtained credit card numbers with the aid of major credit card companies but, says the AP, the numbers could not be matched with card holders. Investigators hope information supplied by PayPal will close the gap.

A PayPal spokeswoman said the eBay subsidiary was still evaluating options on how to respond to the government's request, citing customer privacy as a serious consideration

In 2005, PayPal handled over $27.5 billion in money transfers between 100 million global account holders.

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