On Tuesday, September 23rd, the IRS announced that the use of paper checks to issue tax refunds will be reduced to severely limited circumstances. The process of transitioning to primarily digital payments will begin on September 30th. Executive Order 14247 clarifies the instances where paper checks can continue to be used, the types of digital deposits that can/will be issued, and their reasoning behind government’s changes.

Why the change? Digital payments alleviate the “unnecessary costs; delays; and risks of fraud; lost payments, theft, and inefficiencies” that printed checks incur, according to Sec. 1 of the Executive Order. The majority of tax refunds are already processed via a direct deposit; for 2024 tax refunds, only 7% were mailed to taxpayers as physical checks.

For the time being, taxpayers are advised to continue using existing forms and procedures for all filing that occurs in calendar year 2025. This includes current methods of filing such as Free File, Direct File, mailing paper forms, and online tax preparation software. However, the Executive Order also states that payments made to the IRS will eventually be expected to be made digital whenever possible. Not only will most Americans stop receiving checks; the IRS will soon stop accepting them as payment from those without exceptions to the rule.

The four exceptions that will continue to receive printed checks are as follows, outlined in Sec. 4 (a):

1. Individuals who do not have access to banking services or electronic payment systems
2. Certain emergency payments where electronic disbursement would cause undue hardship, as contemplated in 31 C.F.R. Part 208
3. National security – or law enforcement – related activities where non-EFT transactions are necessary or desirable
4. Other circumstances as determined by the Secretary of the Treasury, as reflected in regulations or other guidance.

The new policy extends even further than individuals’ tax refunds and filing; according to Sec. 3 (a) of the Executive Order, “to the extent permitted by law, the Secretary of the Treasury shall cease issuing paper checks for all Federal disbursements inclusive of intragovernmental payments, benefits payments, vendor payments, and tax refunds” excluding the exceptions and accommodations outlined in Sec. 4 (a).

For the official news release from the IRS, view this webpage. If you have questions for the Bowman & Company LLP Partner that prepares your tax returns, submit a message to them directly, or use the “Contact Us” button below.