The IRS is moving toward an all-electronic payment system and has released guidance on how the transition may affect taxpayers.
Why This Matters
In March 2025, Executive Order 14247 directed federal agencies to transition toward a fully electronic payment system. The change will eventually require that most payments to and from the IRS be processed electronically.
The IRS recently released guidance (FS-2026-02) explaining how the transition affects taxpayers. While electronic payments are not yet mandatory for payments to the IRS, the agency generally stopped issuing paper refund checks to individual taxpayers after September 30, 2025.
For many taxpayers, the shift means ensuring direct deposit information is available and understanding the electronic payment options the IRS now expects taxpayers to use.
Receiving Refunds From the IRS
The executive order applies broadly to federal payments, including tax refunds, benefits, grants, and contractor payments.
Paper checks may still be issued in limited situations when no electronic alternative exists. For example, paper checks are still being issued for decedents’ accounts and certain amended returns.
Taxpayers who have not yet set up direct deposit may wish to do so to avoid potential refund delays.
What Happens Without Direct Deposit Information?
If a tax return does not include valid banking information, the IRS will request updated details before issuing the refund.
The process generally works as follows:
- The IRS will send a letter to the last known address on record requesting the taxpayer to update their banking information with the IRS. Updating bank account information after filing a tax return must be completed through the IRS Online Account. The IRS does not accept updated account information by phone or in person.
- IRS letter CP53E will be sent in the mail requesting direct deposit information due within 30 days or an explanation of why such information cannot be provided.
- If a waiver request is approved, a paper check is typically issued within seven to ten days.
- If direct deposit information is not provided in response to the CP53E notice, the IRS may issue a paper check after approximately six weeks.
A Warning About Rejected Deposits
If a direct deposit is rejected by the taxpayer’s bank, the IRS typically freezes the refund and does not automatically issue a paper check.
Taxpayers must take action to correct the banking information or request an alternative payment method before the refund can be released.
Options Without a Bank Account
Taxpayers without traditional bank accounts still have several options for receiving payments:
- Request a paper-check waiver through an IRS online account
- Call IRS customer service to request a paper check
- Receive funds through certain mobile payment applications or prepaid debit cards
Making Payments to the IRS
The IRS currently continues to accept cash, checks, and money orders for tax payments. However, the agency intends to transition toward fully electronic payment methods over time.
The guidance does not specify when paper payments will no longer be accepted.
Electronic Payment Options
Taxpayers can use several electronic payment methods when paying federal taxes:
Method | Key Features |
IRS Direct Pay | Free; transfers funds directly from a bank account |
IRS Individual Online Account | Provides full payment management |
IRS Business Tax Account | Designed for business taxpayers |
Debit/Credit Card or Digital Wallet | Convenient, but processing fees may apply |
EFTPS | Currently available but expected to sunset in late 2026 |
New EFTPS accounts can no longer be created as of October 17, 2025, although existing users may continue using the system. Taxpayers may want to begin transitioning to Direct Pay or IRS Online Accounts.
The IRS has also indicated that Direct Pay will become available to trusts later in the year.
Paying With Cash
Taxpayers who prefer to pay with cash may use VanillaDirect, which allows tax payments at participating retailers such as CVS, Walmart, and 7-Eleven. Taxpayers generate a barcode linked to their tax payment and present it at the participating retailer to complete the transaction. Certain limits and fees may apply.
Payment Frequency Limits
Certain electronic payment methods have limits on how often they can be used. Debit card, credit card, and cash payments may only be applied to specific forms, payment types, and tax years. The IRS provides a detailed chart outlining these limits on its website.
Direct bank account debits generally do not have these restrictions, allowing taxpayers to make multiple payments when needed.
What Business Owners Need to Know
During the first year of implementation, the IRS plans to introduce additional electronic payment features for businesses.
One expected change will allow direct deposit refunds for business tax returns, expanding electronic refund options for business taxpayers.
Businesses currently have several electronic payment options, including:
- Debit or credit card payments or digital wallets
- IRS Direct Pay
- IRS Business Tax Account
- EFTPS
However, businesses should note that federal tax deposits must already be made electronically. Cash and card payments cannot be used for these deposits, and penalties may apply if deposits are not submitted electronically unless reasonable cause can be demonstrated.
Additional guidance is expected for businesses that submit bulk payments, such as payroll deposits or trustee account payments.
The complete FAQ document from the IRS, including guidance for international taxpayers and third-party stakeholders, is available at www.irs.gov/pub/taxpros/fs-2026-02.pdf.
If you have questions about how these electronic payment changes may affect your business or personal tax situation, the Windes Tax Services team can help. Contact us to learn more.