The Internal Revenue Service (IRS) has recently announced a major overhaul of the entire tax refund process for individual taxpayers. Effective from September 30, 2025, paper refund checks will be discontinued; pursuant to Executive Order 14247, modernization of the payment system is to happen via furnishing electronic refunds.
This is a larger agenda on the federal level to make the government's disbursements more secure, faster, and more efficient. With the IRS now going for online tax refund disbursements, the avenues open for reducing risks associated with paper checks, saving monies, and expedient taxpayer refund disbursements.
In this blog, let us understand the implications, advantages, preparation, exceptions, and status of this IRS modernization initiative.
Why Are Refund-Checks Being Phased Out?
There are numerous significant reasons for phasing out tax refund paper checks:
Protect Taxpayers from Fraud and Theft
A check can be lost, stolen, altered, and delayed in the mail. The IRS put it that paper checks are more than 16 times more likely to encounter any one of these issues than an electronic payment. The overriding concern with lost or stolen refund checks is a risk of identity theft for taxpayers, and that the refund will not be processed in time to access their money.
Faster Delivery of Refunds
Electronic refunds are typically received by taxpayers within 21 days of filing their return electronically and requesting direct deposit; paper checks take 6 weeks or longer due to processing and mailing. Faster refunds reduce financial burden and improve the taxpayer experience.
Reducing Cost to Taxpayers and IRS
The IRS incurs substantial administrative and material costs to print, mail, and handle paper checks. Payment by electronic means costs the IRS less in materials and administration, which promotes efforts to better allocate taxpayer dollars.
Current Landscape: How Are Taxpayers Receiving Refunds Today?
By the 2025 tax season, the vast majority of individual taxpayers were already using electronic refund methods:
- In 2025, the IRS issued over 93.5 million tax refunds to individual income tax filers.
- Of those refunds, 93% were delivered as direct deposits to bank accounts or other electronic accounts.
- Only about 7% of individuals received their refunds by way of paper checks in the mail from the IRS.
Because the adoption of direct deposit refund payments is at such a high rate, further eliminating paper checks now provides the next obvious step to improve federal payments.
What Does This IRS Change Mean for Taxpayers?
Understand the impact of the changes proposed by the IRS:
No Changes in Filing Procedures
- Taxpayers will still file their taxes as they currently do, using tax forms existing today, via existing electronic methods, or through paper.
- This announcement refers solely to the method by which taxpayers will receive their tax refund after processing.
Electronic Refunds Will Be Standard
Most refunds will be paid electronically and securely, via:
- Direct deposit into the taxpayer’s bank account.
- Another non-check option - a secure means to pay taxpayers who do not have a bank account - prepaid debit card or digital wallet access.
Support for Unbanked and Underbanked
The IRS recognizes that not all taxpayers have access to traditional banking. Therefore, the Treasury Department will offer additional means to provide refunds:
- Taxpayers who do not have a bank account will still qualify to receive a prepaid debit card, which can be reloaded with refunds.
- The IRS may issue refunds to taxpayers through digital wallet payment methods (available in mobile payment apps).
- There will be limited circumstances where a non-electronic method may be provided to issue the refund.
- Taxpayers are encouraged to obtain their banking information or open up free or low-cost accounts through programs supported by the FDIC via its GetBanked initiative or MyCreditUnion.gov.
Speed and Accessibility
Taxpayers receiving funds electronically can expect:
- Faster access to funds, potentially as early as three weeks.
- Less mail loss and mail theft can be anticipated.
- More control over scheduling the receipt of the refund via direct deposit.
How to Prepare for the Upcoming Changes
The following will help the citizen enhancement for the additional efficient transition to fully electronic refund processing.
Bank Account Information Accuracy
- To effect direct deposits, valid bank routing and account numbers must be given on the tax return.
- When submitting the information, one should double-actually check to avoid any hindrance that may cause delay in the refunding period.
Open and Maintain a Bank Account
- Taxpayers must open a bank account with an FDIC-insured institution or credit union, in case they do not presently have anything to speak of.
- They may also visit GetBanked or MyCreditUnion.gov to search for cheap options.
Choose Direct Deposit when Filing
- When filing your return, at a minimum, taxpayers should choose direct deposit at the time of filing, especially if filing electronically.
Monitor Digital Wallet Options
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Taxpayers should be alert to other options the IRS may implement for electronic refunds (prepaid cards and wallets, etc.).
File Timely and Include Complete Information
- Reasonable documentation and timely filings are other ways to expedite the issuance of the tax refund.
What about Payments to the IRS?
- Currently, the phase-out of paper checks will only extend to refunds to individual taxpayers.
- Tax payments to the IRS will continue as they are through the existing methods until new guidance is provided.
- During this phase of transition, taxpayers should continue to make tax payments by established methods, including check, electronic funds withdrawal, EFTPS, etc.
Additional Benefits of Digital Refund Payments
Below are the benefits of digital payments:
- Environmental Impact: Decreased consumption of paper and postal resources furthers the goal of sustainability.
- Convenience: Electronic refunds can be tracked easily and are accessible online via the bank portal or IRS account.
- Transparency and Security: Electronic processing reduces fraud while giving the taxpayer a more secure way to access funds.
What If You Don’t Have a Bank Account?
Acknowledging that millions of Americans are considered unbanked or underbanked, the IRS and the Treasury Department are providing options such as:
- Preloaded debit cards with consumer protections for refunds,
- The use of digital wallets as a convenient alternative to bank accounts for deposits, and
- Access to education to facilitate greater banking utilization and financial inclusion.
Ultimately, these objectives are aimed at ensuring that all taxpayers will benefit from the enhancements in refund processing without added hardship.
When Will Taxpayers See These Changes?
Beginning on September 30, 2025, the IRS will start the process of phasing out paper checks:
- They will release detailed guidance concerning refunds related to 2025 tax returns before the 2026 filing season.
- Taxpayers filing extensions before December 31, 2025, will still use these existing processes until new guidance is received.
IRS and Treasury Actions to Assist Taxpayers
- The IRS- Modernizing the Tax System portal at IRS.gov/modernpayments will be updated regularly with FAQs, instructional videos, and technical guidance.
- Nationwide outreach campaigns will help taxpayers understand how to receive their refunds electronically.
- Customer service agents will receive extensive training to help in the transition.
Potential Challenges and Solutions
Some taxpayers and stakeholders may face difficulties, including:
- Accessing or setting up a bank account.
- Learning a new method of refund delivery, for example, prepaid cards.
- Cybersecurity or fraud in electronic payments.
Helpful Links
- IRS Drought Relief for Farmers and Ranchers 2025
- IRS Interest Rates for Q4 2025: What Taxpayers Need to Know
- IRS Tax Forum 2025: Registration Timelines & Insights
The IRS will offer Financial literacy programs, learning opportunities to prevent fraud, and overall better cybersecurity standards.
The cutting out of paper tax refund checks is a major step along the way of tax modernization. Upon changing from paper to electronic means of payment, taxpayers will experience improved speed and security and lower costs of the services. Changing from paper checks being mailed to taxpayers as refunds to electronic means will assist the overall stability of the tax system and help in modernizing governmental processes.
Taxpayers may want to prepare for this change, by updating their banking information, filing electronically, and availing themselves of IRS resources for updates.
Contact The Fino Partners today to get more such recent updates from the IRS regularly and stay updated with the law.
