IRS to also eliminate paper check refunds in September
Story by Gabriela León, Explicame, 4/7/25
As part of a sweeping modernization effort, the U.S. government will halt the use of paper checks for all federal payments, including IRS refunds (Tax Refunds), by September 30, 2025. This directive follows an executive order signed by President Donald Trump on March 25, aimed at reducing inefficiencies, cutting costs, and curbing fraud within the federal disbursement system.
The executive order requires all government agencies to switch entirely to electronic funds transfers (EFTs), such as direct deposit, prepaid debit and credit cards, digital wallets, and real-time transfers. Agencies have until the September deadline to fully implement the change, though questions remain about whether all departments will meet that timeline.
Citing security and financial concerns, the order states that “paper-based payments, such as checks and money orders, impose unnecessary costs; delays; and risks of fraud, lost payments, theft, and inefficiencies.”
- The directive also mandates that all payments to the government, like IRS taxes owed to the Treasury, must be processed electronically when legally feasible.
The policy does include limited exceptions, including individuals who lack access to banking, certain law enforcement activities, emergency scenarios, and other special cases.
While this executive order marks a strong push from the Trump administration, the move toward digital disbursements began before his term. A Treasury Department bulletin issued in October 2024 had already “strongly encouraged” federal agencies to phase out paper checks, citing a notable increase in fraudulent activity following the COVID-19 pandemic.
As originally reported by CNBC, fraud related to paper checks has become a growing concern. In 2021, the Treasury received 350,000 Suspicious Activity Reports (SARs) related to paper-check fraud—a 23% rise over 2020. By 2022, that number had surged to 680,000. In just six months, more than 15,000 reports of mail-theft-related check fraud were submitted, accounting for over $688 million in losses, with some cases involving U.S. Postal Service employees.
In response, the Treasury’s Financial Crimes Enforcement Network introduced AI-driven fraud detection systems that helped recover over $375 million in altered checks during 2024 alone.
Government data also shows that paper checks are at least 16 times more likely to be reported as lost, stolen, altered, or undeliverable than electronic payments. In terms of cost, issuing a paper check is approximately 18 times more expensive than processing an electronic transaction.
- For taxpayers expecting a refund, the executive order will not impact the 2025 filing season. Since the measure takes effect after the April 15 deadline, those who file on time and request a paper refund check will still be able to receive one this year.
The government plans to offer alternatives, such as prepaid debit cards, for Americans who do not have access to traditional banking, ensuring that the shift to electronic payments remains inclusive.
As the federal government pushes ahead with this digital overhaul, agencies are working to ensure a smooth transition and minimize disruptions for the relatively small number of people who still depend on paper-based transactions.