IRS Explains New Rules for Electronic Tax Payments and Refunds
The Internal Revenue Service has released a new set of frequently asked questions (FAQs) to help taxpayers, businesses, and other stakeholders understand changes under Executive Order 14247: Modernizing Payments To and From America’s Bank Account. These FAQs, published in Fact Sheet 2026-02 on January 27, 2026, provide timely guidance on how the IRS is implementing this major modernization initiative.
Signed on March 25, 2025, Executive Order 14247 directs the Department of the Treasury, in coordination with the IRS and other federal agencies, to transition federal payments and collections toward fully electronic methods. The goal is to reduce fraud, improve payment security, cut operational costs, and enhance the efficiency and reliability of transactions to and from the federal government.
Key Changes and Clarifications
Under the Executive Order, federal payments sent by the government, including tax refunds, benefit payments, grants, and vendor disbursements, will increasingly be delivered through secure electronic channels. Likewise, payments made to the government, such as tax balances due, fees, and penalties, are moving toward mandatory electronic collection methods.
Importantly, the FAQs emphasize that filing tax returns themselves is not changing: taxpayers will continue to prepare and submit returns as before. What is changing is how refunds are issued and how payments are made, beginning with the 2026 filing season.
Phasing Out Paper Checks
The IRS and Treasury began phasing out paper refund checks and other disbursements on September 30, 2025, to the extent permitted by law. Most taxpayers already receive refunds by direct deposit, but the transition expands this expectation and encourages broader use of electronic methods due to their speed, lower costs, and greater security compared with mailed checks and money orders.
For individuals without traditional bank accounts, alternatives like direct deposit to certain prepaid debit cards or electronic payment via approved mobile apps are expected to be available, and limited exceptions will be provided for hardship or other qualifying circumstances.
What Taxpayers Should Do Now
To prepare for these changes, the IRS encourages taxpayers to:
Provide direct deposit information when filing returns and ensure banking details are current and accurate.
Use electronic payment options (e.g., IRS Direct Pay or the Electronic Federal Tax Payment System) for tax payments.
Visit IRS.gov for updates on electronic payment options and resources for unbanked taxpayers.
The IRS notes that while paper checks and money orders will still be accepted for now, the long-term direction is toward a secure, efficient, and fully electronic federal payment system.
We encourage you to consult with your tax advisor to ensure you’re prepared for these adjustments before they take effect. For personalized guidance, reach out to our team. We're here to help you navigate the evolving tax landscape.