Earlier this year, President Trump signed Executive Order 14247, Modernizing Payments to and from America’s Bank Account.
The order mandates the phase-out of paper check disbursements and receipts and is applicable to all federal agencies including the IRS. This order affects the way taxpayers will pay their taxes and receive refunds.
Why the Change?
The order cites substantial increases in mail theft since the COVID-19 pandemic along with reports that Department of the Treasury checks are 16 times more likely to be reported lost or stolen, returned undeliverable or altered than are electronic funds transfers (ETF). The order also touts operational efficiency as a reason for the push to digitize all payments—along with reducing the cost of maintaining the specialized technology required to digitize paper records, which was estimated to cost the taxpayer over $657 million in fiscal year 2024.
Key Dates
The order provides that all payments made to the federal government, including taxes, fines, fees, and loans, must be made electronically by September 30, 2025 (where permissible under existing law). Below are the key dates leading up to implementation on September 30, 2025.
- March 25, 2025: Executive Order 14247 signed.
- June 23, 2025: Implementation plans from heads of federal agencies were to be submitted.
- September 21, 2025: Deadline for the Treasury Secretary to submit a full implementation report detailing the progress.
- September 30, 2025: Scheduled phase-out of paper check payments. After this date, most payments to and from the IRS must be submitted electronically.
- October 15, 2025: Recommended deadline for taxpayers to be fully prepared for electronic payments, particularly those individuals that filed extensions of their individual income tax returns (Form 1040) that might have an overpayment or underpayment.
On May 30, 2025, Treasury published in the Federal Register a request for information soliciting public comments by June 30, 2025. During the comment period, Treasury received close to 250 comments with the AICPA comments specifically requesting that the IRS and Treasury Department delay the deadline. At this time there is no guarantee that the requirement will be delayed prior to September 30, 2025, so taxpayers need to be ready to comply.
Who Needs To Act?
While businesses are accustomed to paying tax obligations electronically due to various payment mandates in prior years, the order now applies to individuals.
Section 3 of the order specifically lists Federal disbursements inclusive of intragovernmental payments, benefits payments, vendor payments, and tax refunds with limited exceptions described in Section 4.
Federal agencies shall take appropriate action to eliminate the need for Treasury’s physical lockbox services and expedite requirements to receive payment of federal receipts, including fees, fines, loans, and taxes, through electronic means.
The IRS currently offers numerous electronic payment options on its site. These include:
- On-line account.
- IRS Direct Pay – online transfers directly from a checking or savings account at no cost to taxpayer.
- Debit card, credit card, or digital wallet. (Note: this could be an expensive way to pay taxes as the credit card service charge is owed by the taxpayer. A 2% fee on $500,000 estimated tax payment would be $10,000.)
- Electronic Funds Withdrawal (EFW) – an integrated e-file/e-pay option offered when filing federal taxes electronically using tax preparation software through a tax professional or the IRS at IRS.gov/Payments.
- Electronic Federal Tax Payment Systems (EFTPS) – Allows payment of taxes online or by phone directly from a checking or savings account. There is no fee for this service. A taxpayer must enroll either online or by having an enrollment form mailed.
- Pay by Phone.
Exceptions to the Executive Order:
Section 4 of the executive order provides certain exceptions to the payment and collection mandate in limited circumstances including:
- Individuals who do not have access to banking services or electronic payment systems.
- Certain emergency payments where electronic disbursement would cause undue hardship, as contemplated in 31 C.F.R. Part 208.
- National security-related or law enforcement-related activities where non-EFT transactions are necessary or desirable.
- Other circumstances as determined by the Secretary of the Treasury, as reflected in regulations or other guidance.
Individuals or entities qualifying for an exception under this section or other applicable law shall be provided with alternative payment options.
Next Steps
As part of the order – and to ease the transition process – the Treasury Department will launch a comprehensive nationwide campaign to educate payment recipients on the transition and provide guidance for setting up electronic payment options. Unfortunately, no official guidance to date has been issued addressing the executive order. The IRS 2025 Form 1040-ES estimated tax instructions and the 2024 Form 1040 instructions do include electronic payment options, which might be applicable to the new requirements. Taxpayers should take time to familiarize themselves with all the current electronic payment options prior to the September 30, 2025, deadline to determine what method works best for them.
Taxpayers and their advisors will need time to adjust to the new requirements. Schneider Downs will issue further guidance as additional information becomes available from Treasury and the IRS. Subscribe here to stay on top of this evolving issue and get real-time insights from Schneider Downs’ tax experts.
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