Federal Electronic Payments: An Update and What Taxpayers Need to Know for 2026
The way federal tax payments and refunds move between taxpayers and the U.S. Treasury is undergoing significant changes. What began as a federal initiative to modernize government payments has now entered the implementation phase, with new Internal Revenue Service (IRS) guidance issued in early 2026 to clarify how these changes impact individuals, businesses and tax professionals.
Why the Federal Government is Moving Away from Paper Payments
On March 25, 2025, President Trump signed the executive order Modernizing Payments To and From America’s Bank Account, the purpose of which was to reduce the federal government’s reliance on paper checks and other manual payment methods in favor of electronic transactions whenever legally permitted.
The shift towards electronic payments is intended to improve efficiency, strengthen payment security and reduce costs across federal agencies. For taxpayers, this modernization is expected to result in faster refunds, clearer payment tracking and fewer disruptions due to delayed or lost mail.
What Has Already Changed
As of September 30, 2025, the federal government began to phase out paper refund checks for individual taxpayers, along with other federal disbursements. In most cases, federal tax refunds are now issued electronically rather than by mail. Direct deposit has become the standard delivery method and taxpayers who do not provide electronic payment information may experience delays while alternative arrangements are made.
It’s important to note that the process for filing tax returns has not changed. Taxpayers still file returns using the same methods and deadlines as in previous years.
Clarifications in the January 2026 IRS Update
In January 2026, the IRS released Fact Sheet FS-2026-02 to address common questions around this transition to electronic payments. This guidance confirmed that most paper refund checks are no longer issued and that electronic payment methods are now the default for refunds and federal reimbursements.
The executive order applies broadly to tax payments, penalties, fees and other remittances paid to the IRS. While checks and money orders may still be accepted during this transition period, the IRS strongly encourages taxpayers to use electronic payment options and has suggested that reliance on mailed payments will continue to decrease in the coming years.
The IRS also confirmed that some legacy systems are being phased out. Enrollment in the Electronic Federal Tax Payment System (EFTPS) for new individual users ended in late 2025 and individuals are now encouraged to use IRS Direct Pay or IRS Online Accounts instead. Businesses, however, may continue to use EFTPS.
What These Changes Mean for Individuals
If a taxpayer files a return without providing direct deposit information, the IRS may issue a notice requesting electronic payment details before releasing the refund, which can cause delays. However, the IRS also acknowledges that not all taxpayers have traditional bank accounts to accept payment.
If a taxpayer does not have a bank account, the IRS plans to support alternative electronic payment options such as prepaid debit cards or digital payment solutions approved by the Treasury. Taxpayers without bank accounts should explore low-cost or no-cost banking options or other alternatives before filing season to avoid any delays. Individuals who owe taxes should also plan ahead for electronic payments, as they provide immediate payment confirmation and reduce risk of late payments.
While limited exceptions may exist for hardship situations, the overall direction is that electronic delivery of payments should be the standard.
What Businesses Need to Consider
Businesses should view this transition as an opportunity to modernize internal payment workflows. Employer tax deposits, excise taxes and income tax payments should be made electronically whenever possible. Businesses that still rely on mailed checks may face processing delays as the IRS continues reducing its paper infrastructure.
Reviewing available payment methods and aligning payment timing with cash flow planning will be increasingly important. Businesses should also ensure that accounting teams and external advisors are aligned on approved electronic payment channels and deadlines.
Preparing Now to Avoid Future Issues
Taxpayers and businesses that proactively update banking information, transition to electronic payment systems and familiarize themselves with the IRS’s online tools will be better positioned for success this upcoming tax season. Waiting until the last minute may result in delayed refunds, missed payments or unnecessary correspondence from the IRS.
You can view the IRS Fact Sheet on the IRS website: https://www.irs.gov/pub/taxpros/fs-2026-02.pdf