The IRS, U.S. Treasury, and Social Security Administration have announced a significant change in how federal payments are made. Beginning September 30, 2025, the government will no longer issue paper checks for tax refunds or federal benefits. All payments will transition to an electronic-only system.

📌 Important reminder: The September 15, 2025, estimated tax deadline will be the last day the IRS accepts paper checks.

Why the Change?
The move, prompted by a 2025 Executive Order, is intended to improve efficiency, reduce fraud, and cut administrative costs. According to the Treasury, paper checks are far more likely to be lost, stolen, or altered compared to electronic transfers.


What This Means for You

• Bank account required: Refunds and benefits will only be delivered to U.S.-based bank or credit union accounts.

• Faster refunds: Direct deposit eliminates mail delays and speeds up payment delivery.

• Reduced fraud risk: Electronic transfers eliminate risks associated with lost or stolen checks.

Key Challenges and Exceptions
While most taxpayers will benefit from this transition, there are important exceptions and considerations:

• Unbanked individuals: Those without bank accounts will need to open one, or the government may expand debit card programs.

• Special hardship exceptions: The Treasury may allow non-electronic disbursements in cases of undue hardship, emergency, or national security concerns.

• Estates and trusts: Executors or trustees may face challenges linking refunds to bank accounts that don’t match return information. Guidance is still pending.

• U.S. citizens abroad: Since the IRS typically requires a U.S. bank account for direct deposit, Americans living overseas should consider U.S.-based banking solutions to avoid potential delays.

Impact on Foreign Real Estate Transactions (FIRPTA)
Foreign sellers of U.S. real estate and buyers required to withhold under the Foreign Investment in Real Property Tax Act (FIRPTA) will also be affected. Historically, many FIRPTA withholding payments were made by paper check. Under the new rules:

• All payments must go through the Electronic Federal Tax Payment System (EFTPS).

• Buyers need a U.S. Taxpayer Identification Number (TIN), a U.S. mailing address, and time to set up EFTPS accounts—often weeks before closing.

• Failure to plan can result in delays, disputes, or penalties.

What You Should Do Now

• Confirm you have a valid U.S. bank account for refunds or benefits.

• If involved in foreign real estate transactions, ensure EFTPS accounts are set up well in advance.

• Executors, trustees, and taxpayers abroad should watch for IRS guidance on possible exceptions.

Important Clarification
The transition to an all-electronic system is currently scheduled to take effect September 30, 2025, per the Federal Register notice Transition to Electronic Payments and Disbursements.

That said, the IRS and U.S. Treasury may issue additional guidance or extensions for certain taxpayers, including estates, trusts, U.S. citizens abroad, and real estate transactions, where electronic systems may pose unique challenges. We will continue to monitor developments and provide updates as new information becomes available.

Bottom Line
The September 15, 2025, estimated tax deadline will be the last opportunity for the IRS to accept paper checks. After that, all payments and refunds are set to be electronic.

This change represents a significant step toward modernization, but it requires careful planning to minimize disruptions. If you’re unsure how the shift may affect you, our advisors are here to help you prepare.