The Internal Revenue Service (IRS) has released significant updates regarding the implementation of Executive Order 14247, "Modernizing Payments To and From America’s Bank Account." On January 27, 2026, the Service issued IR-2026-13 and a substantially revised Fact Sheet (FS-2026-02), aiming to "help taxpayers, businesses, and other stakeholders understand the changes" mandated by the order.

For tax professionals, the shift away from paper-based financial transactions requires immediate attention to client advisory protocols, particularly regarding the sunsetting of Electronic Federal Tax Payment System (EFTPS) enrollments for individuals and the procedural mechanics of missing direct deposit information.

Operational Context and Effective Dates

As outlined in IR-2026-13, the primary objective of these FAQs is to support the Executive Order in "its effort to reduce fraud, improve security, lower costs, and make payments to and from the IRS faster and more reliable".

Practitioners must note that the transition is already underway. Consistent with the Executive Order, the IRS "started phasing out paper tax refund checks and other disbursements on Sept. 30, 2025". While the Service notes that "filing tax returns is not changing", the mechanics of settlement—both debit and credit—are undergoing a mandatory digital transformation.

Below is a technical breakdown of the new guidance added to the Fact Sheet on January 27, 2026.

Topic A: Individual Refunds and Disbursements

The January 27 updates clarify the strict limitations on paper check issuance and the procedural consequences of failing to provide banking data.

1. Cessation of Paper Checks The IRS confirmed that "the IRS generally stopped issuing paper refund checks for individual taxpayers after Sept. 30, 2025". While "limited exceptions to the paper check phase-out will also be established," particularly for hardship or legal requirements, the default posture is now exclusively electronic.

2. Procedure for Missing Banking Information (CP53E Notice) Crucially for tax return preparation, providing electronic payment information remains "voluntary," yet the consequences of omission are significant. If a return is filed without banking information:

Step 1: The return is accepted and processed.
Step 2: The IRS sends a letter to the taxpayer.
Step 3: The taxpayer receives a CP53E notice.

The Fact Sheet details this correspondence specifically: "The taxpayer will then receive a CP53E notice in the mail requesting a response within 30 days, either to provide banking information or to explain why such information cannot be provided".

Practitioners should advise clients that "IRS employees cannot take direct deposit information over the phone or in person" for security reasons; clients must use the IRS Individual Online Account to respond. If the taxpayer fails to respond to the notice, "the refund will be released as a paper check after six weeks".

3. Decedent Accounts Contrary to the general modernization trend, the IRS clarified that "no changes have been made to how refunds currently are issued to deceased persons". The Service "will continue to accept or generate checks in accordance with current practice" until further guidance is issued.

Topic B: Payments to the IRS and EFTPS Changes

The scope of Executive Order 14247 applies broadly to "payment of tax liabilities, enrolled agent fees, pre-filing agreements, and advanced pricing agreement fees".

1. Sunset of EFTPS for Individuals A critical operational change affects the Electronic Federal Tax Payment System. The Fact Sheet establishes a freeze on new individual enrollments:

"Effective Oct. 17, 2025, individuals are no longer able to create new enrollments via EFTPS.gov. Individual taxpayers not enrolled in EFTPS.gov by Oct. 17, 2025 can instead create an IRS Online Account for Individuals or use the IRS Direct Pay guest path".

While existing users may continue to use the system temporarily, "all individuals will be required to transition from EFTPS.gov later in 2026".

2. Federal Tax Deposits (FTD) and Penalties The IRS reiterated the prohibition on using alternative payment methods for FTDs. "Businesses cannot use cash or card payments to make Federal Tax Deposits (FTD)". These must be deposited electronically via the business tax account, Direct Pay for businesses, or EFTPS. Failure to comply may result in a penalty "unless the taxpayer can establish reasonable cause for why they aren’t able to pay electronically".

3. Cash Payments For unbanked taxpayers, the IRS confirmed that the "Vanilla Direct" option at participating retail stores "counts" as an electronic payment.

Topic C: Business Refunds and Bulk Processes

For business entities, the updates focus on the acceleration of refund processing. "In the first year of implementation, after Sept. 30, 2025, the IRS will be adding the direct deposit option to most business tax return types". This expansion allows businesses to move away from the paper checks that are being phased out.

Regarding bulk payments—a common concern for payroll providers and trustees—the IRS assured stakeholders that they will "expand digital payment options, making it easier for businesses, trustees, and fiduciaries to handle bulk or large payments securely".

Topic E: Third-Party Stakeholders and Circular 230

The updated Fact Sheet addresses the concerns of tax professionals regarding compliance and workflow.

1. Circular 230 Compliance The IRS explicitly addressed whether third-party payments comply with professional standards:

"Yes. Tax practitioners can use electronic payment methods such as EFTPS or Electronic Funds Withdrawal (EFW). Additionally, tax practitioners may advise taxpayers to pay directly through alternative electronic payment methods... and stay in compliance with Circular 230".

2. Trustees and Court-Appointed Officials Acknowledging that some fiduciaries may lack the infrastructure for immediate digitization, the IRS stated: "The IRS will accept checks when electronic payment methods are not available for a certain transaction type or in specific situations such as those involving hardships and/or legal and procedural requirements".

Reliance on Guidance

Professionals should note the reliance provision included in the preamble of FS-2026-02. While these FAQs are not published in the Internal Revenue Bulletin, the IRS states:

"Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax".

Practitioners are encouraged to document the date of any FAQs relied upon, as "news items may not be updated after their release".

Prepared with assistance from NotebookLM.