IRS Issues Guidance on Shifting Payments, Refunds to Electronic Methods

The agency clarified that a recent executive order does not change how taxpayers file their tax returns.

The Internal Revenue Service building in Washington on Jan. 6, 2026. Madalina Kilroy/The Epoch Times

The IRS has issued new guidance detailing frequently asked questions regarding electronic payments for tax refunds and other transactions effective this filing season, the agency said in a Jan. 27 statement.

The IRS and other federal agencies are transitioning payments to and from the federal government to electronic methods, in line with a March 25 executive order issued by President Donald Trump.

For money sent by the government, affected payments include tax refunds, grants, benefits, and vendor or contractor payments. For money sent to the government, the following are affected: payment of tax balances due, penalties, fees, and other remittances made by individuals, businesses, state or local partners, and nonprofit organizations.

“Taxpayers will continue to file their returns in the same manner as they have in the past,” the agency said.

“The change affects how refunds are issued and how payments are made, not how returns are prepared or submitted, beginning with the 2026 filing season. For now, checks and money orders will still be accepted.

“Electronic payments are generally processed faster, cost less to handle, and reduce errors compared to paper payments. Limited exceptions to electronic payment requirements will be available in specific situations, such as those involving hardship and/or legal or procedural requirements.”

The seven-page guidance FAQ document addresses several questions people may have regarding the IRS’s implementation of the executive order.

The IRS advised taxpayers to prepare for the change by ensuring that their direct deposit information is up to date when filing tax returns. Taxpayers without a bank account should consider opening one, it said.

According to the agency, the transition to electronic payment will not delay tax refunds, and taxpayers will, in most cases, receive refunds faster with electronic methods.

If taxpayers don’t provide direct deposit information, and they are not exempted from the paper check phase-out rule, “their refunds could take longer to process,” the IRS said.

“If banking information is missing when filing a tax return, the tax return will still be accepted and processed,” the agency said. “For all taxpayers with missing information, the IRS will send letters to individuals using their last-known address on record, asking them to update their banking information.”

No Calls or Texts, Only Mail

The IRS clarified that it will never call or text taxpayers to ask for updated banking information, and that the agency will contact them only by mail.

While direct deposit to bank accounts will be the main method for issuing refunds this filing season, not all taxpayers may have access to traditional banking services, as acknowledged by the executive order.

For such individuals, the IRS will allow alternative payment methods such as prepaid debit cards and mobile apps. They may also qualify for an exemption from the paper check phase-out.

As for payments made to the agency, the IRS said it will continue accepting and processing mailed payments, such as cash, checks, and money orders, “for now.” But over time, the IRS will fully transition to electronic methods, it said.

At present, digital methods to pay the IRS include debit or credit cards, digital wallets, IRS Individual Online Account, IRS Direct Pay, and the Electronic Federal Tax Payment System.

“These FAQs support the Executive Order in its effort to reduce fraud, improve security, lower costs, and make payments to and from the IRS faster and more reliable,” IRS Chief Executive Officer Frank J. Bisignano said.

The March 25 executive order “Modernizing Payments To and From America’s Bank Account” had raised concerns about the continued use of paper-based payments by the federal government, such as checks and money orders.

Paper payments impose “unnecessary costs; delays; and risks of fraud, lost payments, theft, and inefficiencies,” it said, adding that Treasury checks are 16 times more likely to be reported stolen, lost, altered, or returned undeliverable compared with electronic funds transfer.

The order directed all executive departments and agencies to transition to digital payment solutions and take “all steps necessary” to enroll recipients in electronic payment methods.

The 2026 filing season began on Jan. 26, with the deadline set at April 15. The agency is expecting to receive around 164 million individual income tax returns this year, with most of them filed electronically.