The IRS is making a major shift in how tax refunds and payments are handled: paper checks are soon to be a thing of the past. This move is part of a broader plan to update federal financial processes and improve efficiency.
This transition to electronic refunds and payments, triggered by an executive order, is aimed at reducing costs and expediting processing times while also minimizing the risk of fraud, loss, theft, and undeliverability related to paper checks.
Going digital isn’t an option for everyone, so there will be exceptions for extreme cases where folks don’t have access to online banking services.
Here’s what you need to know to be ready for the changes.
Going from paper checks to electronic refunds
Starting Sept. 30, 2025, tax refunds will mainly be sent via direct deposit, and the IRS will stop issuing paper checks.
- Direct deposit: This likely will be the main method for individuals to receive their tax refunds. Remember that you’ll need to include your direct deposit information with your income tax filings.
- Prepaid card accounts and other digital payment options: In certain circumstances, taxpayers may have the option to receive refunds via these methods.
Electronic payment methods
Also starting Sept. 30, 2025, taxpayers will no longer be able to submit payments using paper formats like checks or money orders. This will apply to all income tax payments, including estimates, extensions, and any balances due with your annual tax returns.
The good news is, the IRS is trying to provide as many electronic payment options as possible.
- IRS Direct Pay: You can securely submit payments online via the IRS site using your bank account information.
- Online account: Also known as an ID.me account, you need to set up a new account and verify your identity. It has the same payment functionality as Direct Pay, but unlike Direct Pay, it allows you to review prior and scheduled payments.
- Wire transfers: This method is primarily for large payments being submitted directly from an investment account, often with assistance from your investment advisor. Your financial institution may charge a wire transfer fee.
- Digital wallets and real-time payments: More modern technologies are expected to be used for federal transactions and could potentially be used for some types of refunds.
- Debit and credit card payments: This already common method for submitting tax payments is expected to continue and potentially expand.
In certain cases, such as trusts, you may need to establish specific online accounts to make electronic payments. For example, trusts must create an Electronic Federal Tax Payment System (EFTPS) account to submit secure payments online.
Note that creating these online accounts can take weeks to complete because of the IRS backlog and various identity verification steps. By reaching out to your tax advisor now to begin the process, you’ll be ready come Sept. 30.
Keep in touch with your tax advisor
In the coming weeks and months, federal agencies will continue to work through the details of this change and share information as it becomes available to help create a smooth, secure transition to digital IRS payments and refunds. The goal of this change is to ultimately make things faster, easier, and safer for taxpayers, but adjustments will be necessary for many people.
That’s why it’s important to consult with your Mowery & Schoenfeld tax advisor to ensure you’re ready for these changes, or to discuss any other tax planning matters well before the next tax season begins.