A major shift is underway in the way individuals and businesses make payments to and receive funds from the IRS. On March 25, 2025, President Trump signed Executive Order 14247, titled Modernizing Payments to and from America’s Bank Account. This directive mandates a transition to electronic funds transfer (EFT) for nearly all financial transactions involving the IRS, with the goal of improving efficiency, reducing costs, and minimizing fraud.
Why the Shift?
This change is driven by a desire to modernize the federal payment system. The U.S. Treasury estimates that processing paper checks cost taxpayers more than $657 million in Fiscal Year 2024 alone. In addition to being costly, paper-based payments are more vulnerable to theft, fraud, and delays. By mandating electronic payments, the government aims to reduce these risks and streamline the entire process for both taxpayers and federal agencies.
Key Dates and Implementation
The transition to electronic-only payments is happening in stages:
- March 25, 2025: Executive Order 14247 signed.
- June 23, 2025: Deadline for heads of federal agencies to submit implementation plans.
- September 21, 2025: Deadline for the Treasury Secretary to submit a full implementation report detailing the progress.
- September 30, 2025: Scheduled phaseout of paper check payments. After this date, most payments to and from the IRS must be conducted electronically.
- October 15, 2025: Recommended deadline for taxpayers to be fully prepared, especially those filing extended individual returns (Form 1040).
Who Must Comply?
The executive order applies broadly to payments involving federal agencies, including:
- Tax payments and refunds
- Fees and fines
- Loans and disbursements
While the mandate covers a wide range of payments, it applies only where electronic transactions are allowed by law.
Exceptions to the Rule
While the push toward EFT is sweeping, the Treasury Secretary has outlined a few exceptions, including:
- Individuals without access to banking or digital payment services
- Emergency situations where electronic payments would create undue hardship
- National security or law enforcement scenarios where non-electronic transactions are necessary
- Other cases at the Treasury Secretary’s discretion
What Taxpayers Should Do Now
Taxpayers and their advisors should begin preparing for the new requirements. For individuals filing Form 1040, preparers will need to collect bank account details (routing and account numbers) in order to process refunds or payments electronically. For businesses filing Form 1120, additional guidance is expected from the IRS soon.
The IRS already offers several options for making electronic payments:
- Direct Pay: For individuals making a payment directly from their bank account
- Electronic Federal Tax Payment System (EFTPS): For businesses and individuals, including scheduling future payments
- IRS Online Account: View balances and make payments
- Debit or credit card: Available through IRS-approved payment processors (note: fees may apply)
- ACH transfers or wire transfers: For certain high-dollar transactions
To learn more about the available payment options, visit the IRS website:
https://www.irs.gov/payments
Looking Ahead
The federal government’s move to modernize IRS payments marks a significant change in how Americans interact with the tax system. By transitioning to electronic payments, the IRS aims to create a more secure, efficient, and cost-effective process for everyone involved. With the paper check phaseout coming soon, now is the time to ensure your systems—and your bank account information—are ready.
John Hadwen is a Principal at ARB. He specializes in providing individuals and businesses with comprehensive
tax compliance and consulting services related to closely-held business, manufacturing, construction & real estate, and professional services firm taxation. Prior to joining ARB, John was a Tax Principal at a large, regional CPA firm.
