Managing Secondary Income With Credit, Debit, and Gift Cards

The Internal Revenue Service is expanding its scrutiny of credit, debit and gift card transactions as part of a broader effort to detect unreported income, particularly from secondary or informal sources, according to updated guidance released in April 2026.

The IRS announced that We see increasing monitoring of payment card activity to identify individuals who may be failing to report income from side gigs, freelance work, or cash-based transactions that are increasingly processed through digital payment platforms. This includes transactions made via credit, debit, and prepaid gift cards, even when individual amounts fall below traditional reporting thresholds.

While the IRS has long required third-party settlement organizations to report gross payments exceeding $600 annually to individuals via Form 1099-K, the agency now says it is using aggregated data and pattern analysis to detect potential underreporting even when individual transactions or accounts do not trigger automatic reporting.

The agency emphasized that the initiative is not targeting routine consumer spending but is focused on identifying patterns consistent with business activity that goes unreported. For example, repeated deposits into personal accounts linked to card transactions, or frequent use of gift cards to receive payments for services, may prompt further review.