Compliance
Compliance Checklist: What Businesses Need to Know About Paper Check Phase-Out Starting 9/30/2025
With paper tax refund checks being phased out and electronic payments becoming mandatory, businesses and individuals need to update practices to stay compliant by September 30, 2025.
By NomadicTax Research Team • 5-8 min read • November 16, 2025
## What’s Changing
Beginning **September 30, 2025**, under Executive Order 14247, the U.S. government will **phase out paper tax refund checks** for individual taxpayers and shift most federal disbursements to electronic means. IRS confirmed this via its announcement IR-2025-94. ([irs.gov](https://www.irs.gov/newsroom/irs-to-phase-out-paper-tax-refund-checks-starting-with-individual-taxpayers?utm_source=openai))
## Compliance Implications for Businesses & Individuals
- Businesses that historically receive government payments by paper check may need to update their payment reception methods.
- Transaction records may need changing if clients or vendors expect paper checks.
- For individuals, if previously dependent on check payments (refunds, reimbursements), bank account or digital payment preferences should be updated.
## Essential Steps to Take Before the Deadline
1. **Verify your banking and direct deposit information** is current. Most refunds will be by direct deposit or a secure electronic method. ([irs.gov](https://www.irs.gov/newsroom/irs-to-phase-out-paper-tax-refund-checks-starting-with-individual-taxpayers?utm_source=openai))
2. **Set up digital payment options** for those who don’t have a bank account (e.g., prepaid debit cards or digital wallets). The IRS is promising limited exceptions but documentation may be required. ([irs.gov](https://www.irs.gov/newsroom/irs-to-phase-out-paper-tax-refund-checks-starting-with-individual-taxpayers?utm_source=openai))
3. **Communicate with your clients or employees** about this transition—expect delays if data (like account numbers) are missing.
4. **Update internal policies** if you handle payments or refunds via checks—most such operations will become obsolete.
5. **Be alert for waivers**. In certain circumstances, individuals may qualify for exceptions—e.g. lack of banking access or severe hardship. Confirm eligibility early. ([irs.gov](https://www.irs.gov/newsroom/irs-to-phase-out-paper-tax-refund-checks-starting-with-individual-taxpayers?utm_source=openai))
## Example in Action
A small nonprofit that receives grant payments from the federal government via check will need to provide electronic payment details and may need a bank or account that accepts electronic deposits. If they miss this transition, they risk delayed payments or even losing access to grants until payment methods are updated.
For individuals who have no bank account, such as remote or underserved communities, participating community organizations or tax advisors should provide options and assistance ahead of 9/30/2025 so no one is left behind.
## Potential Risks & Penalties
- Missing refunds or delays if refund delivery details are not updated.
- Risk of fraud or misdirected payments if sensitive financial data is handled haphazardly.
- Administrative burden or costs if transitioning tools and accounting systems last-minute.
## Conclusion
The shift from paper to electronic payments is inevitable, and its benefits—speed, efficiency, security—are clear. But compliance is time-sensitive. Preparing now ensures you won’t face late-year chaos or lose access to refunds or payments when paper checks are phased out.