Insights

IRS Transitioning to Electronic Payments

The IRS and U.S. Department of the Treasury have announced a major change in how individual taxpayers will receive their federal tax refunds. This is the start of the broader transition to electronic payments in general – both TO and FROM taxpayers.

On September 30th, as required by Executive Order 14247, the IRS began phasing out paper refund checks as part of a nationwide transition to electronic refund payments. The Executive Order applies to payments made by taxpayers to the IRS as well. This new policy simply finalizes the shift toward a fully digital payment process and is part of the government’s effort to make refund delivery faster, safer, and more cost-effective. For 2025 returns and beyond, electronic payments will become the standard. 

Why This Matters

  • Electronic payments are more efficient and less expensive.
  • Taxpayers who choose direct deposit typically receive refunds within 21 days of e-filing, compared to six weeks or more for mailed paper checks.
  • Electronic payments are more reliable – paper checks are 16 times more likely to be altered, lost, stolen, or delayed than payments made electronically. 

What Taxpayers Should Know About REFUNDS

  • Filing remains the same so continue to file tax returns using your usual method.
  • Most refunds will be issued via direct deposit or other secure electronic methods.
  • For taxpayers who do not have a bank account, the IRS will provide options like prepaid debit cards, digital wallets, or grant limited exceptions.
  • To prepare now, make sure your banking information is current or consider opening a free or low-cost account. 

What Taxpayers Should Know About PAYMENTS

  • Taxpayers can pay their tax bill directly from a checking or savings account for free using either IRS Direct Pay or by using an IRS Online Account.
  • Taxpayers can set up, view payment history, and manage payments through their individual online accounts.
  • In lieu of the above, taxpayers can continue to use existing payment methods until new guidance is released. 

NOTE: EFTPS is being phased out for individual taxpayers.

As indicated, the IRS will issue detailed guidance before the 2026 filing season begins. For now, taxpayers filing 2024 returns (including those on extension through the end of 2025) should continue using current procedures. For updates, visit IRS.gov/modernpayments.

Have questions or need help regarding your specific situation? Contact Tax Partner Scott Watters at swatters@ppandco.com, or call us at (408) 287-7911. We’re here and ready to help.