# Any FBAR reporting requirements for foreign Paypal accounts used for non-business use?



## readmylips_nonewtaxes

Is there some general consensus on whether foreign Paypal accounts need to be reported on the FBAR and Form 8938 for non-resident, US citizens? I have read a wide range of comments on this issue. Sometimes I see that foreign Paypal accounts need to be reported on the FBAR form only if they are being used for business, but not reported if used for personal use. I've seen some comments saying that if the Paypal account held any balance, it may need to be reported. This would be a situation similar to a credit card account which perhaps you received a refund after you paid off your balance. 

I use my foreign Paypal account almost exclusively for eBay and merchant purchases. There is also the odd once in 10-year garage sale item I may sell, or a friend who pays me back $20, or for making charitable donations. I definitely don't have any business income funneled through Paypal. Now when I look at my [foreign] Paypal statement summaries, I see that every credit card purchase made to independent merchants, for example, show the funds moving from the credit card into my Paypal account, then immediately to the merchant. But, Paypal is categorising these as a "general credit card deposit", followed by a "general credit card payment". So in-effect, it would appear as if very brief deposits are being made to this Paypal account. 

I have not in the past included my Paypal account on the FBAR form because I always though that since I opened the Paypal account while I lived in the USA that it remained a US Paypal account in the foreign country. But after some recent research, it seems that foreign addresses are not allowed on US Paypal accounts, so I must have switched it over to a Paypal Canada account once I moved (years ago).

I decided to call Paypal to inquire the type of Paypal account I had and indeed, it was switched to a Canadian Paypal account. I then asked the Paypal rep. which address do I use for my Canadian Paypal account on the FBAR form. I was transferred to Paypal's "IRS department". The rep. gave me their San Jose, California address. I found that odd, so I reiterated that I am asking about a Paypal Canada account. The rep. repeated the San Jose address. I found this confusing.

I tried to enter the San Jose address on my FBAR form for Paypal, but neither the online FBAR form nor the PDF FBAR form would allow me to input US addresses. Does that mean my Paypal Canada account doesn't count as a foreign account, or did the Paypal phone rep. make a mistake with the address? When I look at Paypal's e-mail receipts after sending a payment, I do in fact see a Canadian address listed for Paypal Canada.

So what is the best course of action to take here? I have received conflicting answers. Do I just now start reporting this Paypal Canada account on FBAR? Do I continue not to report it because it isn't used for business purposes? Do I close the account entirely due to the uncertainty? I guess Paypal is no longer needed for eBay purchases, so it isn't as important as it used to be. The perk in paying with Paypal is you get 6 months of buyer protection.

When I look back at some other posts, someone posted a table showing a comparison between Form 8938 and FBAR requirements. There is a column which lists: "Financial account held at a foreign branch of a U.S. financial institution". And this table shows that it has no Form 8938 filing requirements, but it does have FBAR filing requirements. Does Paypal fall into the category of "Financial account held at a foreign branch of a U.S. financial institution"? The link from web.archive.org is here: Comparison of Form 8938 and FBAR Requirements I don't know the current URL.

If there is an FBAR filing requirement for a "foreign" Paypal account, does it seem odd that I don't need to include it on Form 8938 ? 

And if there is an FBAR filing requirement for a foreign Paypal account used only for personal use, what value do you enter as the maximum amount during the year? Would it be the $400 credit card payment made to a merchant, which gets classified as a "general credit card deposit", or the $20 my friend paid me back?


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## Nononymous

Honestly, it probably doesn't matter how or if you report the thing. Nobody looks at FBARs.


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## Moulard

FBAR and FATCA Form 8938 serve two separate purposes.

FBAR is actually an antimoney laundering initiative while Form 8938 is really about trying to ensure you are not hiding taxable income in foreign accounts... hence the difference in reporting requirments

If you have money in a PayPal account that is held by an affiliate domiciled outside the US, then yes, you need to include it on your FBAR (assuming you otherwise meet the requirements for filing an FBAR). This is because you have a financial interest in the funds held by PayPal.

I don't know enough about PayPal terms and conditions, but it would only be reportable on Form 8938 if any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account or asset are or would be required to be reported, included, or otherwise reflected on your income tax return.

So if Paypal paid you interest, or you were being paid for goods and services into the account then it would be reportable, but if it is just being used to "spend" money then it is probably not reportable.


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## readmylips_nonewtaxes

Moulard & Nononymous, thank you for your replies. 

Paypal has been used almost exclusively to pay for stuff, but in 2020, a friend who was out-of-country asked me to buy something for him from someone local. That out-of-country friend then paid me back via Paypal for that item. Thus, you can see that there was a $20 deposit. Is the Paypal account thus reportable in 2020 only because of this payback? If so, it doesn't seem like a good idea to be paid back via Paypal. And if this has triggered a reporting requirement for FBAR, then what about those "general credit card deposits" that erroneously look like deposits into Paypal? Do I report the max. credit card deposit/payment, e.g. $400 in 2020, or that $20 pay back?

And if Paypal is listed on FBAR for 2020, and in 2021, I have nobody pay me back and I sell nothing, then you are saying it is not reportable? Seems to me that it is best to be consistent and just keep reporting it, and in which case, would 2021 show a max account value of $0, or the maximum "credit card deposit" to pay for merchandise? Thanks!


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## Moulard

If it is a once or a rare case I would not worry about it.

There is a memorandum from the IRS I read some time back that explored things like credit cards... and while not paypal, I think the principles expoused in that case apply here. Ordinarily a credit card is not a financial account - its a line of credit. Just because you put in a bit of extra money into it occassionally so that it has a positive balance doesn't magically turn it into a financial account. However if you started treating it like a debit account where it always has a positive balance, then the character of it it changes to be closer to a financial account that could be reportable.


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## readmylips_nonewtaxes

Moulard, thank you for your analysis. While I can see some similarity between credit cards and Paypal, there is some difference. With credit cards, mostly the credit card holder would be putting funds onto the card, whereas in this case with Paypal Canada, a friend added the $20 to my account to pay me back. 

I am also concerned that my call to Paypal would have triggered some FATCA reporting requirement on their part? Or does Paypal only initiate FATCA reporting if an account exceeds a certain threshold of funds coming in? I was under the impression that the 20K worth of sales threshold was only to generate the 1099-K form and is a separate occurrence from when a “financial” firm like Paypal notes to the IRS that the account is held by a US citizen? I am probably thinking about this in too much depth, but if that is the case, would it not be better to report Paypal anyway on FBAR? In which case, would the $20 pay back or the $400 credit card purchase be noted as the max. 2020 account value?


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## Moulard

Understand that a credit card is not the same, but is, to an extent analogous in that it is a financial construct that can be both an account and not an account depending on how it is used.
Its entirely possible that PayPal reports everything because it is easier for them to that than it is to sort through and find the records that meet a reporting threshold particularly once you start to deal with exchange rates etc. I doubt a phone call would have had any impact.
Personally I think you are overthinking it, but if it helps you to sleep at night then report it using whatever nominal value you feel warranted. 
If you do report it, no one will ever actually look at it unless they have some other reason to do so.


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## readmylips_nonewtaxes

Thank you very much. I'll contemplate these 3 options.

On a similar note of non-bank "financial entities", I recently opened a currency exchange account through some local Canadian firm. The function is to take funds from one Canadian bank account in USD and deposit it into another Canadian bank account in CAD. I opened it because the spread is much cheaper than anywhere else. I understand that there is a holding period that this currency exchange company holds my funds to ensure that they have cleared. Is this entity a reportable account on Form 8938 and FBAR?


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