ARTICLE | September 29, 2025
Is your business prepared for one of the most significant changes to federal tax payments in decades? Starting September 30, 2025, the IRS will stop issuing paper refund checks as part of Executive Order 14247, "Modernizing Payments To and From America's Bank Account." This sweeping change affects all taxpayers and requires immediate preparation to avoid delays and complications.
What's Changing and When
The transition impacts two critical areas: refunds will shift to electronic-only delivery starting September 30, 2025, while payments to the IRS will transition to electronic methods "as soon as practicable." For the 6.5 million taxpayers who still received paper refund checks in 2025, this represents a fundamental shift in how they interact with the IRS.
"Many of our clients initially express concern about providing banking information electronically, but the reality is that paper checks actually carry higher risk," says Jennifer Sicking, Managing Partner at KHA Accountants. "Treasury data shows paper checks are 16 times more likely to be lost, stolen, or delayed compared to electronic transfers. This change ultimately enhances security while improving efficiency."
Preparing Your Business and Personal Finances
The deadline may seem distant, but preparation should begin now. Business owners need to ensure their corporate banking arrangements can handle both incoming refunds and outgoing tax payments electronically. This includes verifying routing and account numbers, updating payment systems, and training staff on new procedures.
Individual taxpayers should review their current banking arrangements and consider opening accounts if they don't already have them. The IRS recommends exploring low-cost options through FDIC.gov/GetBanked or considering Treasury-sponsored alternatives like prepaid debit cards for those who prefer not to use traditional banking.
For taxpayers abroad, the challenge is more complex since the IRS currently prohibits direct deposits to foreign accounts—even foreign branches of U.S. banks. These taxpayers may need to rely on limited exceptions or establish U.S.-based banking relationships.
Understanding Exceptions and Alternatives
The IRS will provide limited exceptions for individuals without access to banking services or where electronic payment would cause "undue hardship." However, qualifying for these exceptions requires advance planning and proper documentation. Don't assume you'll automatically qualify—start the process early if you believe you need an exception.
"The key to successful compliance is proactive preparation," explains Cindy Grieco, Partner at KHA Accountants. "We're helping clients establish electronic payment systems now, well before the deadline, to ensure smooth transitions and avoid any disruption to their tax obligations or refund timing."
Your Action Plan for Compliance
Start by conducting a comprehensive review of all your tax-related banking arrangements, both personal and business. Ensure that routing and account numbers are current and accurate for direct deposit. If you currently receive paper checks for any federal payments, contact the issuing agency to set up electronic delivery.
For businesses, update your accounting systems and procedures to accommodate electronic-only transactions. Consider the cash flow implications of faster electronic payments and refunds, and adjust your financial planning accordingly.
The digital transformation of federal payments represents more than regulatory compliance—it's an opportunity to modernize your financial processes for greater security and efficiency. At KHA Accountants, our team is already helping clients navigate these changes while identifying opportunities to optimize their overall tax and financial strategies.
Need guidance preparing for the electronic payment transition? Contact KHA Accountants to speak with one of our tax experts about developing a compliance strategy tailored to your unique situation.