Here's an interesting item from a tax letter I am reading:

"IRS examiners are scoruing transaction records of PayPal, an online payment firm. It suspects many tax evaders are using PayPal to make web purchases with funds from banks in Caribbean tax havens. By avoiding U.S. banks, cheats thought they could fly under IRS' radar. Examinations will be ordered up when agents find big-ticket purchases that don't jibe with the incomes these taxpayers listed on their 1040's. And PayPal records can help pinpoint unreported income from eBay sales."