Do Credit Card Companies Report to the IRS?
Understand when and how credit card activity is reported to the IRS. Get clear insights on tax implications for your transactions.
Many individuals wonder about the extent to which their credit card activities are reported to the Internal Revenue Service (IRS). This curiosity often stems from a desire to understand financial privacy and tax obligations. While the IRS receives information related to certain payment card activities, it is important to understand the specific circumstances that trigger such reporting and how it impacts taxpayers.
IRS Reporting for Payment Card Transactions
The primary mechanism through which payment card activities are reported to the IRS is Form 1099-K, “Payment Card and Third Party Network Transactions.” This form is an information return used by third-party payment networks, such as credit card processors, payment apps, and online marketplaces, to report the gross amount of payment card transactions for goods and services.
A recent development, the “One Big Beautiful Bill Act,” enacted on July 4, 2025, reverted the Form 1099-K reporting threshold. This legislation restores the original threshold of $20,000 in gross payments and 200 transactions. Third-party payment processors are now required to issue a Form 1099-K only if a payee exceeds both $20,000 in payments and 200 transactions for the year. This reporting applies to the gross amount of transactions and does not account for any fees, credits, refunds, or other adjustments.
Who is Subject to Payment Card Reporting
Form 1099-K is issued to businesses, independent contractors, freelancers, and individuals participating in the gig economy who receive payments for goods and services through payment card transactions. For example, online sellers on platforms like Etsy or eBay, ride-share drivers using services like Uber or Lyft, and freelancers utilizing platforms such as Upwork or Fiverr may receive this form.
Typical consumers using credit cards for personal purchases do not have their individual spending reported to the IRS via Form 1099-K. This form is specifically designed for reporting income-generating activities, not personal consumer spending. The reporting obligation falls on the payment processor, not the individual credit card issuer for every consumer transaction.
Transactions Not Subject to Direct Credit Card Reporting
Many common credit card activities are not directly reported to the IRS by credit card companies through Form 1099-K. Personal spending, such as purchasing groceries, clothes, or paying household bills, does not trigger a 1099-K. These transactions are considered personal expenses and are not income to the cardholder.
Similarly, cash advances taken from a credit card are not reported on Form 1099-K. Cash advances are essentially a form of borrowing and are not considered income. Balance transfers between credit cards also fall into this category, as they represent a movement of debt, not income.
Other credit card charges, such as interest paid on balances, annual fees, or late payment fees, are not reported to the IRS via Form 1099-K. These are costs associated with using the credit card, not payments received for goods or services. The outstanding balance or total credit card debt also remains outside the scope of 1099-K reporting.
What to Do When You Receive a 1099-K
If you receive a Form 1099-K, the first step is to carefully review the information provided and reconcile it with your own financial records. This form reports the gross amount of payments received, so it is necessary to compare this figure with your internal sales data or income statements. This reconciliation helps ensure accuracy and allows you to identify any discrepancies.
The income reported on Form 1099-K, if it pertains to goods or services, must be included on your tax return. For self-employed individuals or sole proprietors, this income is typically reported on Schedule C (Form 1040), Profit or Loss from Business. While the 1099-K reports gross sales, you are still permitted to deduct legitimate business expenses, such as transaction fees, shipping costs, and the cost of goods sold, to arrive at your net taxable income.
Should you find any inaccuracies or believe the Form 1099-K was issued in error, you should contact the filer of the form immediately. The filer’s contact information is typically located in the upper left corner of the form. Requesting a corrected form is the appropriate action. If a corrected form cannot be obtained, the IRS provides guidance on how to report the incorrect amount on Schedule 1 (Form 1040) to offset the error, ensuring it does not impact your adjusted gross income.