Tips on Electronic Payment Options as the IRS Phases Out Paper Checks

Key Tips for Electronic Tax Payments

Learn essential tips for using IRS electronic payment and refund options as paper checks fade out. Prepare now to ensure fast, secure, and hassle-free tax transactions.

Tips on Electronic Payment Options as the IRS Phases Out Paper Checks

As part of the federal government’s initiative to modernize the nation’s financial systems, the IRS is transitioning away from issuing and receiving paper checks. This change aligns with Executive Order 14247: “Modernizing Payments to and From America’s Bank Account.”

Beginning September 30, 2025, most paper refund checks will no longer be issued. Additionally, the IRS plans to require taxpayers to make all tax payments electronically starting in 2027 or later.

Transition to Electronic Refunds for 2025 Tax Returns

For tax year 2025, the IRS will begin applying the executive order to refund payments. While nothing changes for 2024 or earlier returns, taxpayers filing 2025 returns must:

• Provide direct deposit information, or
• Qualify for a limited exception.

If a taxpayer does not include direct deposit details, the IRS will:

1. Process the return normally
2. Send a letter requesting banking information
3. Issue a paper check after six weeks, to prevent interest accumulation

Taxpayers should expect refund delays if they do not proactively include direct deposit information.

How Taxpayers Can Receive Tax Refunds Electronically

To comply with the IRS transition away from paper checks, taxpayers should familiarize themselves with the available electronic refund options.

1. Direct Deposit Into Bank or Retirement Accounts

The most common and reliable option is direct deposit into a checking, savings, mutual fund, or IRA account.

Taxpayers must include:

• Bank routing number
• Account number

For retirement accounts (IRAs), taxpayers must notify the IRA trustee so funds are deposited correctly.

This method is:

• Fast
• Secure
• Recommended for the majority of taxpayers

2. Direct Deposit to Prepaid Debit Cards

Taxpayers can also choose to deposit refunds onto refillable prepaid debit cards.

Key requirements:

• The card must have routing and account numbers
• The taxpayer must verify these numbers with the card issuer

Prepaid cards can be particularly useful for unbanked taxpayers.

Transition to Electronic Refunds for 2025 Tax Returns

3. Direct Deposit to Mobile Apps

Many digital wallets and mobile banking apps (e.g., Cash App, Chime, StripePayPal) support direct deposit.

Requirements:

• The app must provide routing and account numbers
• Taxpayers must verify the correct numbers to enter on their tax return

This provides flexibility for younger taxpayers and those using fintech banking solutions.

4. Splitting Refunds Into Multiple Accounts

Taxpayers may divide their refund into up to three different accounts using:

• IRS Form 8888 – Allocation of Refund

This option is useful for taxpayers who want to:

• Save part of the refund
• Deposit into retirement accounts
• Use multiple financial platforms

Most tax preparation software supports this feature.

What Happens If a 2025 Tax Return Lacks Direct Deposit Information

If direct deposit details are missing:

• The e-filing system will generate alerts notifying the taxpayer
• The IRS will still accept the return
• After filing, the IRS will send a letter requesting banking information
• The taxpayer has 30 days to update or correct details
• If no response is received, or if the bank rejects the deposit, the IRS will issue a paper check after six weeks

A dedicated phone line will be available for taxpayers who need to request an exemption.

However, taxpayers should expect longer refund timelines if they do not provide direct deposit information upfront.

Electronic Payment Options for Paying a Tax Bill

As the IRS moves toward fully electronic payments, taxpayers should become familiar with all available digital tax payment methods.

1. Direct Bank Account Payments

Taxpayers can:

• Pay directly from a checking or savings account
• Make payments for tax owed at filing
• Schedule estimated tax payments
• Change or cancel scheduled payments (up to two days before processing)

Direct Pay is:

• Free
• Secure
• Does not require an account login

Both individuals and businesses can use bank-based payments.

2. Debit Cards, Credit Cards, and Digital Wallets

Important notes:

• Processing fees may apply
• These methods cannot be used for payroll taxes
• Payments are processed through IRS-approved third-party providers

This option offers convenience but may cost more due to service fees.

3. Payments Through an IRS Online Account

Taxpayers with an IRS Online Account can make payments for:

• Balance due
• Amended return liabilities
• Estimated tax payments
• Extension payments (January–April)
• Offer-in-Compromise fees and payments
• Proposed assessments

This method provides full payment history tracking and offers secure account-based access.

Electronic Payment Options for Paying a Tax Bill

4. Electronic Federal Tax Payment System (EFTPS)

The EFTPS is best for:

• Business taxpayers
• High-volume payments
• Payroll and employment tax deposits
• Individuals who prefer structured scheduling

Features:

• Requires enrollment
• Allows payments directly from a bank account
• Provides detailed records of transactions

This system is widely used by employers, corporations, and tax professionals.

5. Electronic Funds Withdrawal

Available only when filing electronically:

• Taxpayers authorize the IRS to withdraw payment from the bank account
• Commonly used with tax software or through tax professionals
• Useful for single payments made at the time of filing

EFW is simple and integrated into the filing process.

Considerations as Treasury and IRS Implement the Executive Order

Some taxpayers may face challenges in adopting electronic refund and payment systems. The IRS acknowledges these barriers and plans to implement exception procedures.

1. Banking Options for the Unbanked

Unbanked taxpayers can access affordable banking options through:

• FDIC: GetBanked Initiative
• Veterans Benefits Banking Program (VBBP) for VA benefit recipients

These options provide:

• Low-cost or no-cost accounts
• Direct deposit capability
• Access to mainstream financial services

2. Taxpayers Living Abroad

U.S. citizens abroad must:

• Ensure their foreign bank accepts U.S. Treasury electronic payments
• Consult international banking services when necessary
• Contact tax professionals for direct deposit guidance

The IRS is expected to provide formal guidance on applying for electronic payment exceptions before the 2025 filing season.

Considerations as Treasury and IRS Implement the Executive Order

Preparing for the IRS Transition Away From Paper Checks

To prevent delays or missed refunds, taxpayers should take proactive steps now:

• Review available banking and direct deposit options
• Double-check direct deposit information for accuracy
• Update financial records in tax software or with tax professionals
• Educate friends, family, and clients about the upcoming shift

Preparing early ensures smooth and timely tax processing once paper checks are phased out.

Conclusion

The IRS’s transition away from paper checks marks a major modernization effort aligned with Executive Order 14247. As refunds and tax payments move overwhelmingly toward digital methods, taxpayers must familiarize themselves with electronic options both to receive refunds and pay tax bills securely.