Following a recent Executive Order, the IRS will phase out the use of paper checks for both issuing tax refunds and receiving tax payments, effective September 30, 2025. The change aims to reduce financial fraud, enhance payment security, improve efficiency, and lower processing costs.
While this is a step toward modernizing the IRS payment system, the transition may present challenges for certain taxpayers, particularly those with limited access to or familiarity with online payment systems, the “unbanked” population, and non-U.S. companies using foreign financial institutions. International banking rules currently limit Automated Clearing House (ACH) transfers, which could complicate cross-border payments.
Exceptions to the “no paper check” rule include:
Paper checks will still be permitted in limited circumstances, including:
- Individuals without access to banking services or electronic payment systems;
- Certain emergency payments where electronic disbursement would cause undue hardship, as outlined in 31 C.F.R. Part 208;
- National security or law enforcement-related activities where non-EFT transactions are necessary or advisable.
- Other circumstances as determined by the Secretary of the Treasury through regulations or other guidance.
Taxpayers qualifying for an exception will be offered alternative payment options.
What to do if you can’t use electronic payments:
- Individuals without bank accounts may be offered options such as prepaid debit cards or assistance opening low-fee bank accounts.
- The IRS is expected to release additional guidance as the transition date approaches, outlining procedures for requesting exceptions and setting up alternative payment methods.
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