On March 25, 2025, President Trump signed an executive order requiring that all federal payments, including tax refunds, transition to electronic methods by September 30, 2025. The order, titled "Modernizing payments to and from America's bank account," is intended to reduce costs and enhance payment security by eliminating paper checks.
This shift will significantly impact millions of taxpayers and has major implications for the accounting industry, including tax professionals and accounting firms.
Here is what you need to know:
- Key provisions: The executive order mandates the use of electronic payment methods for all federal disbursements, such as tax refunds and Social Security payments, as well as payments to the government, like taxes and fines. Acceptable electronic methods include direct deposits, debit and credit cards, and digital wallets.
- The reasoning: The transition is driven by the need to eliminate inefficiencies, reduce fraud risks, and enhance the security of payments. The executive order highlights that the continued use of paper payments imposes unnecessary costs and delays, and increases the risk of fraud and theft.
- Paper check exceptions: While the goal is a fully electronic system, the executive order does acknowledge the need for exceptions for specific circumstances, such as for individuals without access to banking services, emergency payments, or for certain law enforcement activities. The Treasury Department will also make prepaid debit cards available as an alternative.
- Next steps for clients: If you are a client who still relies on paper checks for federal payments, and you don’t qualify for an exemption, you must transition to an electronic payment method before the September 30, 2025, deadline. The Treasury Department will be launching a nationwide campaign to educate payment recipients and provide guidance on how to set up electronic payment options.
Don't navigate this transition alone. Contact our Redpath Tax Planning team with any questions or to discuss how this change affects your financial planning.