On September 23, 2025, the Internal Revenue Service (IRS), in conjunction with the U.S. Department of the Treasury, announced in IR-2025-94 a significant operational change: the phasing out of paper tax refund checks for individual taxpayers. This initiative, marking the first step in a broader transition to electronic payments, is mandated by Executive Order 14247 and will begin on September 30, 2025, to the extent permitted by law. For tax professionals, understanding the specifics of this change, its legal underpinnings, and the guidance for taxpayers is critical for the upcoming filing seasons.

The Executive Order Mandate

This policy shift stems directly from Executive Order 14247, "Modernizing Payments To and From America’s Bank Account," issued on March 25, 2025. The order’s stated purpose is to promote operational efficiency and reduce the unnecessary costs, delays, and security risks associated with paper-based payments flowing into and out of the United States General Fund.

The order highlights several key justifications for the transition:

Security and Fraud Prevention: The order notes that mail theft complaints have risen substantially since the COVID-19 pandemic and that historically, Treasury checks are 16 times more likely to be lost, stolen, altered, or reported undeliverable than an electronic funds transfer (EFT).
Cost Reduction: Maintaining the infrastructure for paper-based transactions cost American taxpayers over $657 million in Fiscal Year 2024 alone. The IRS announcement echoes this, stating that electronic payments are more efficient and cost less than paper.
Efficiency: The continued use of paper checks creates delays and inefficiencies. The IRS confirms that electronic refunds provide taxpayers with faster access to their money, often in less than 21 days for electronically filed returns with direct deposit, compared to six weeks or longer for mailed checks.

Section 3(a) of the Executive Order explicitly directs the Secretary of the Treasury to cease issuing paper checks for all Federal disbursements—including tax refunds—effective September 30, 2025, to the extent permitted by law.

Future Refund Payment Options

The IRS has outlined that most refunds will be delivered via direct deposit or other secure electronic methods. While direct deposit is already the predominant method—accounting for 93% of the 93.5 million individual refunds issued during the 2025 filing season—the new policy will require the remaining 7% of recipients to transition to an electronic option.

The IRS and Executive Order 14247 acknowledge that not all taxpayers have traditional bank accounts. To address this, several alternatives will be made available:

Prepaid Debit Cards
Digital Wallets
Limited Exceptions for specific circumstances

The Executive Order directs the Secretary of the Treasury to establish procedures for granting limited exceptions where electronic methods are not feasible, such as for individuals without access to banking services, certain emergency payments where electronic disbursement would cause undue hardship, and for national security activities.

Immediate Actions and Future Guidance for Taxpayers

For now, the IRS advises that there are no immediate changes to filing procedures. Tax professionals should instruct clients, including those filing 2024 returns on extension before December 31, 2025, to continue using existing forms and processes. Filing itself remains the same; only the method of refund disbursement is changing.

Clients who currently receive paper checks should be advised to take proactive steps:

Secure Banking Information: Ensure they know their bank account and routing numbers for direct deposit.
Open a Bank Account: For unbanked clients, they should consider opening a free or low-cost account. The IRS directs taxpayers to resources like the FDIC’s "GetBanked" initiative and MyCreditUnion.gov for options.

The IRS has promised to publish detailed guidance for 2025 tax returns before the 2026 filing season begins. This future guidance will be shared on IRS.gov and through nationwide outreach efforts. The Executive Order also mandates a comprehensive public awareness campaign to inform recipients about the transition and provide guidance on setting up digital payment options.

Broader Implications and Next Steps

It is important to note that Executive Order 14247 also applies to payments made to the IRS. The order calls for all payments made to the Federal Government to be processed electronically as soon as practicable. While the initial IRS announcement focuses on refunds, tax professionals should anticipate future guidance regarding the eventual phasing out of paper check payments for tax liabilities. Taxpayers should continue using existing payment options until further notice is issued. The move toward comprehensive electronic transactions represents a significant modernization effort across the federal government.

Prepared with assistance from NotebookLM.