Prepare Now: IRS to Require Electronic Refunds Starting September 30, 2025

Update: On September 25, 2025, Denise Davis, Director of the IRS Taxpayer Services Division, provided additional details regarding the IRS’ transition to electronic payments for tax year 2025 filings. Key highlights include:

• Main focus: Shifting to electronic payments beginning with the January 2026 implementation.

• Extension filers: Some taxpayers with an October 15, 2025, deadline will file just two weeks after the IRS’ stated electronic refund transition date. Davis noted any adoption gains here will be viewed as a positive, though the primary focus remains on January 2026.

• Business tax forms: Updates are underway to capture direct deposit information directly on forms.

• IRS outreach: Taxpayers who do not provide banking information on their returns will receive letters from the IRS. Refunds will be held for six weeks pending a response.

What this update means for you:

• Begin preparing now to include direct deposit information on 2025 tax filings.

• Expect potential delays in refunds if banking details are not provided.

• Extension filers do not need to worry about this transition for their 2024 tax returns due October 15, 2025, but direct depositing refunds has been shown to be more reliable and expedient.

• Businesses should review upcoming form changes to ensure a smooth transition.

As we noted in our earlier post, in March of this year, President Trump signed an Executive Order to end paper checks being sent to and issued by the federal government by September 30, 2025. This change is part of a government-wide effort to modernize payments and reduce fraud and inefficiency.

Following through on this order, on September 23, the IRS announced that, starting September 30, 2025, most tax refunds will be issued electronically rather than by paper check. The IRS cited the following reasons for the change:

• “Protect taxpayers: Paper checks are over 16 times more likely to be lost, stolen, altered, or delayed than electronic payments. Direct deposit also avoids the possibility that a refund check could be returned to the IRS as undeliverable.
• Speed up refunds: Electronic refunds give taxpayers faster access to refunds. If filing electronically, choosing direct deposit, and there are no issues with the return, payments are issued in less than 21 days, whereas non-electronic payments may take 6 weeks or longer for refunds sent by mail.
• Cut costs: Electronic payments are more efficient and cost less than paper.”

If you have not yet filed your 2024 income tax return and anticipate a refund, you should prepare to provide direct deposit or other electronic payment information to avoid processing delays. If you do not have access to a bank account or would face significant hardship by receiving an electronic payment, you may qualify for an exemption, but those will be limited. The IRS is still developing guidance on how those exceptions will work and what alternatives to provide. Consideration will be given to using prepaid debit cards and digital wallets. The IRS will also publish guidance ahead of the 2026 tax return filing season to advance compliance with this Executive Order.

For now, the IRS is focusing on compliance related to refunds it issues; it is not yet insisting that taxpayers pay tax obligations electronically. This means taxpayers can continue making payments by check for the time being.

If you have concerns about this transition or need help setting up electronic payments or refunds, please let us know so we can assist you.