What Clients Need to Know: Refund Disbursement & Paper-Check Phase-Out under Executive Order 14247
On March 25,2025, the President signed Executive Order 14247 -- titled 'Modernizing payments to and From America's Bank Account' -- which directs the US Department of the Treasury (Treasury) and federal agencies to move away from issuing paper-checks and toward fully electronic payments and receipts to the extent permitted by law.
What the Order Requires:
- Starting September 30, 2025, the Treasury will cease issuing paper checks for most federal disbursements, including tax refund payments, vendor payments, benefit checks, and other government payments.
- All federal agencies must transition to electronic funds transfer (EFT) methods -- e.g., direct deposit, prepaid card accounts, digital wallets, or other modern electronic payment solutions.
- As soon as practicable, the requirement also extends to payments made to the government (receipts), meaning taxpayers' payments to IRS or other agencies should also be done electronically.
The goal: Improve efficiency, reduce costs, prevent fraud or loss, and speed up payment delivery. Treasury noted that paper checks are signficantly more likely to be lost, stolen, altered, or delayed compared to electronic transfers.
What this Means for IRS Refunds
- The IRS has announced that it will phase out paper tax refund checks for individual taxpayers, starting with the 2025 tax return processing cycle (i.e., refunds issued on of after September 30, 2025).
- Taxpayers who wish to receive a refund must provide valid banking information (routing and account numbers) so the IRS can deposit via direct deposit or another authorized electronic method.
- For those without a bank account (unbanked), or who do not have access to traditional electronic payments, the Treasury and IRS anticipate offering alternative electronic payment options -- such as prepaid debit cards or digital-wallet solutions.
- A limited number of exceptions are still allowed under the Order -- for individuals 'without access to banking services or electronic systems.' or in special hardship/emergency cases, among other enumerated categories.
Impact on Taxpayers and What to Do Now
What You Should Do
- Provide valid bank account information on your 2025 (and future) tax returns to enable direct deposit of any refund.
- If you don't have a bank account, or can't use electronic payments, begin exploring alternatives -- such as prepaid-debit cards or mobile wallet services that offer account/routing numbers.
- If you believe you qualify for an exception (e.g., unbanked, living abroad, religious objections, or other hardship), stay alert for guidance from IRS/Treasury on how to request a waiver under the Order's exception provisions.
What Can Happen if You Don't Act
- Taxpayers who do not supply valid banking information may face delays in receiving their refund. According to IRS-Affiliate commentary, the refund could be delayed while the IRS requests banking info, and a paper check may be issued only as a fallback after a waiting period (e.g., six weeks).
- For those who remain unbanked and do not qualify (or fail to obtain) an exception, receiving refunds may become more complicated or delayed.
Why the Government is Doing This:
- Fraud prevention and security -- paper checks are far more susceptible to being lost, stolen or manipulated.
- Efficiency and cost savings -- digital disbursements are cheaper, faster, and simpler to manage than printing, mailing and processing checks.
- Reduced delays and better taxpayer experience -- refunds via direct deposit typically post faster (often within 21 days when e-filed with direct deposit) versus 6 weeks or more for mailed checks.
Considerations & Challenges:
- Some taxpayers -- especially the 'unbanked,' underbanked, or those with limited financial services access -- may find it difficult to comply, requiring careful outreach, education, and support. The Order envisions accomodations or exceptions, but details may be limited.
- Non-US residents or Americans living abroad may face additional hurdles if their foreign banks cannot accept US-based direct deposits.
- Entities such as trustees, estates, foreign recipients, or beneficiaries under certain benefit programs will want to ensure their banking information is current and accepted for electronic funds transfer.
Bottom Line:
If you've historically received paper-check refunds from the IRS or other federal agencies, the era of mailed refund checks is ending. Thanks to Executive Order 14247, starting September 30, 2025, the vast majority of federal refunds will be delivered electronically.
To avoid delays or complications, taxpayers should provide accurate bank-account information or begin exploring alternative electronic payment options (prepad debit cards, degital wallets, etc). For those without banking access or with other concerns, the Order allows for limited exceptions -- but acting proactively is critical.