Federal Government Phasing Out Paper Checks

Earlier this year, President Donald Trump signed an executive order requiring all federal agencies to stop issuing and accepting paper checks by September 30, 2025.  This applies to both disbursements (tax refunds, Social Security, vendor payments) and receipts (1040 tax payments, quarterly estimates, payroll tax deposits, fees, and fines).

Income Tax Refunds

  • IRS has long encouraged direct deposit—9 in 10 refunds are already received this way.
  • Alternatives include prepaid debit cards and payment apps that have account and routing numbers similar to a traditional bank, such as CashApp or PayPal.
  • Americans living abroad face limitations: refunds can only go into U.S. bank accounts.
  • Expect an IRS letter if you haven’t provided banking information for a direct deposit.
  • Refunds may be held up to six weeks if banking information or an exemption reason isn’t provided. It’s unclear when this will begin (post-September 30th or in 2026).
  • Banking information can only be received in an IRS online account, not over the phone or in person.

Tax Payments

  • It is still unclear whether the September 30th date is intended to be a guideline or a hard deadline for tax payments made via paper check with a voucher. We await guidance from the IRS.
  • Even without clarity from the IRS, we recommend making future tax payments electronically using IRS systems such as DirectPay, an IRS online account, or EFTPS.
  • Visit https://www.irs.gov/payments for electronic payment options.

Social Security Administration

  • Less than 1% of beneficiaries (512,690 in 2024) still get paper checks.
  • The SSA is reaching out directly to these individuals. Most recipients already use direct deposit (over 67 million).

Who Might Struggle

  • Unbanked households: An estimated 4% of U.S. households had no bank account in 2023, per FDIC.
  • Taxpayers living abroad without a US bank account
  • Certain tax forms (including 1041 and 706) do not have lines for direct deposit account information
  • Trusts and estates are not eligible to use IRS Direct Pay.
  • Exceptions under the order exist for individuals without access to banking or electronic systems and for certain emergencies. Additional exceptions may be added.

Why the Change?

  • Cost savings: Maintaining paper check systems cost taxpayers $657 million in FY 2024.
  • Fraud prevention: Paper checks are 16 times more likely to be lost, stolen, or altered than electronic transfers.
  • Efficiency: Direct deposit is faster and safer.

While there could be administrative relief, the best option is to prepare for compliance. If you want additional information on how to make tax payments electronically, follow the link: The Safest & Easiest Way to Make Tax Payments  – Dent Moses, LLP