Federal payments are going paperless: Key provisions of the recent executive order

On March 25, 2025, President Trump signed an executive order aimed at modernizing federal payments. The order mandates the transition from paper checks to electronic payments for all federal disbursements, including tax refunds, by September 30, 2025.

This shift will have significant implications for US taxpayers and tax professionals. In this article, we will explore the details of the executive order, including its key provisions, exceptions, and what it means for tax professionals and accounting firms.

Key provisions of the executive order

The primary objective of the executive order is to eliminate paper-based payments, transitioning them to electronic methods. The move aims to improve payment security, reduce inefficiencies, and save operational costs. It also modernizes payments made to the federal government by replacing outdated systems with digital processes.

Electronic payment is mandatory

Starting by September 30, 2025, all federal payment disbursements must be made electronically. This includes IRS tax refunds, Social Security payments, vendor payments, and other federal benefits. The following payment methods will be accepted:

• Direct deposits into a bank account against fraud waste and abuse
• Debit and credit cards
• Digital wallets and real time payment systems
• Other electronic funds transfer (EFT) methods

Both incoming and outgoing federal payments, including fees, fines, loans and taxes, must also be made electronically where permissible by law. This includes intragovernmental payments made to the federal government.

Exceptions to the rule

While the order emphasizes the shift to digital payments, it acknowledges situations where exceptions might apply:

• Individuals without access to banking services or electronic payment systems
• Emergency payments where electronic methods are impractical
• Certain national security or law enforcement-related activities that require non-electronic payments
• Other special cases as outlined in existing laws

Treasury-approved alternatives, such as prepaid debit cards, will also be available for affected individuals.

Advantages of electronic payments

Improved payment security and cost savings

The shift to electronic payments has several advantages, including:

• Enhanced security: Electronic payments are far less likely to be lost, stolen, or altered. According to a White House fact sheet, Treasury checks are 16 times more likely to face issues than electronic payments and expose recipients to fraud and improper payments.
• Cost savings: The federal government spent over $657 million in FY 2024 to maintain paper-based payment infrastructure. The executive order aims to significantly reduce these costs by eliminating paper check processing and outdated physical lockbox services and expedite methods.

Where does the federal government still issue paper checks?

Despite the shift to electronic payments, certain areas still rely heavily on paper checks:

• Tax refunds: As of May 2025, approximately 6.4% (5.9 million) of tax refunds for the 2025 tax season were issued via paper checks. This marks a 30% increase in paper check issuance compared to the previous year.
• Social Security payments: Around 0.7% of the nearly 68.8 million monthly Social Security payments are still made by paper check, affecting approximately 485,000 beneficiaries.

The unbanked population

The executive order’s exception for individuals without banking services (about 4.2% of US households) is significant. The unbanked and underbanked populations are more likely to be impacted by the shift and may need guidance from tax professionals during tax season.

Professionals will play a key role as they inform federal payment recipients of their options under this new mandate.

What does this mean for professional tax preparers and accounting firms?

Tax professionals and accounting firms will play an essential role in helping clients navigate this transition. The executive order presents both challenges and opportunities, particularly for Electronic Return Originators (EROs) and tax preparers.

Key considerations for tax professionals:

• Modified client intake processes: With the mandatory shift to electronic payments, tax professionals will need to adjust client intake forms and systems to ensure they can process payments electronically using electronic funds transfer (EFT) and other approved platforms.

• Client education: Tax preparers will need to educate clients about the transition to electronic payments, helping them set up direct deposit or digital wallets for refunds and benefits.
• Supporting unbanked clients: Tax professionals will need to provide assistance to clients who may not have access to banking services, ensuring they can still receive payments in a secure manner using Treasury-approved alternatives.

How expats can set up a bank account to receive refunds

For US expatriates, setting up an online bank account to receive electronic refunds is essential for complying with the new mandate. If you’re living abroad, you may need to establish a US bank account that can accept direct deposits.

To ensure smooth receipt of tax refunds:

• Choose a bank that accepts US direct deposits: Many US-based banks allow expats to open online accounts with US addresses, allowing for direct deposit of tax refunds.
• Use international banking services: Some international banks offer accounts specifically designed for expats that accept direct deposits from the US. You can also link US accounts with foreign accounts for easy transfer of funds.
• Set up a US address for banking purposes: Some online services, like US-based banks, allow you to set up an account using your US address, even if you’re residing abroad. This is especially helpful for those living in countries with limited banking access.

What federal departments and programs issue the most paper checks?

Several federal departments and programs still issue paper checks in significant quantities:

• IRS tax refunds: As mentioned, nearly 6 million refunds were issued by paper in the 2025 season.
• Social Security: While most beneficiaries receive payments electronically, a portion still rely on paper checks.

The future of federal payments

The move toward electronic payments is not just a compliance issue—it’s a strategic modernization initiative. The Trump payment system executive order replaces outdated methods that impose unnecessary costs delays and security risks.

It’s a chance for tax professionals to offer added value to clients, especially as future executive orders may even seek to establish a central bank digital currency.

Conclusion

The executive order mandating the transition to electronic payments will significantly impact millions of US taxpayers and tax professionals alike. The order’s goal to eliminate paper checks by September 30, 2025, will reduce inefficiencies, enhance payment security, and save costs. Tax professionals must stay informed and adjust their processes to ensure compliance and inform federal payment recipients effectively.

While this is not an executive order to delay tax refund, it is a critical step forward—one that underscores the future of secure, efficient federal payments.