The End of Paper Checks: What You Need to Know
Published on by Agnes Spoelker, Dave Phelps, in Advisory, Tax Services
The era of paper checks for federal transactions is coming to a close. An executive order signed in March 2025 will phase out paper checks for all federal disbursements and receipts by September 30, 2025. This move marks a major step toward modernizing payment systems, improving security, and reducing costs for both taxpayers and the federal government.
Phasing out paper checks
This transition to electronic payment methods reflects the government’s commitment to modernizing, reducing inefficiencies, and minimizing risk. Maintaining digitized paper records cost taxpayers over $657 million in Fiscal Year 2024, creating a significant financial burden. Paper checks have also proven to be far less secure than electronic funds transfers, as they are sixteen times more likely to be lost, stolen, or altered. On top of that, cases of check fraud have surged in recent years, further highlighting the need for a safer, more efficient system. By moving to electronic payments, the government aims to streamline operations and improve the overall security of federal disbursements and collections.
Federal disbursements and payments
Beginning September 30, 2025, federal tax refunds and other payments will no longer be issued as paper checks. Instead, future disbursements will be made through direct deposits to bank accounts, prepaid debit cards, or mobile payment applications that accept direct deposits. This change will apply broadly to tax refunds, Social Security benefits, vendor payments, intergovernmental transfers, and other payouts.
The executive order also directs that payments made to the federal government, such as taxes, fees, fines, and loans, should transition to electronic formats as soon as possible. While no specific deadline has been set for incoming payments, the shift is underway and will soon become the standard.
How to prepare
If you currently receive federal payments by paper check and have not yet set up an electronic method, your future refunds or benefits could be delayed after the September 2025 deadline. Now is the time to prepare by establishing a direct deposit arrangement with the IRS or Social Security Administration. For those without a bank account, prepaid debit cards and mobile payment applications offer viable alternatives. Working with a tax professional can ensure that your payment details are updated and compliant with the new requirements.
What’s next
This shift toward electronic payments represents a significant change in how the federal government manages transactions. While the transition may present challenges for some, the long-term benefits such as faster payments, reduced fraud, and significant cost savings for taxpayers make this an important step forward.
Wondering how the shift from paper checks to electronic payments could affect your business? Contact us today for a free consultation with one of our experienced tax advisors. You can also learn more about related topics in our coverage of The One Big Beautiful Act and on our Tax Compliance page to stay ahead of these changes. As always, we’re here to help.
