Compliance
Compliance Updates: Phasing Out Paper Checks & Remittance Penalties Relief
The IRS is making big shifts in how refunds and payments are made — stopping paper checks and giving transitional grace to remittance providers — which means you’ll need to update accounts and reporting setups soon.
By NomadicTax Research Team • 5-8 min read • November 22, 2025
## Phase-Out of Paper Tax Refund Checks: What Taxpayers Must Know
The IRS has announced that **paper tax refund checks** to individual taxpayers will begin to be **phased out starting September 30, 2025** under Executive Order 14247. ([irs.gov](https://www.irs.gov/newsroom/irs-to-phase-out-paper-tax-refund-checks-starting-with-individual-taxpayers?utm_source=openai)) The IRS expects most refunds to be delivered by **direct deposit or other secure electronic methods**. For those without bank accounts, alternatives such as prepaid debit cards or digital wallets may be available. ([irs.gov](https://www.irs.gov/newsroom/irs-to-phase-out-paper-tax-refund-checks-starting-with-individual-taxpayers?utm_source=openai))
### Implications for You:
- Review or update banking info in your IRS Online Account if needed to ensure smooth refunds.
- If you lack a U.S. bank account or access, investigate options for exceptions.
## Remittance Transfer Providers Get Transitional Penalty Relief
Under OBBBA, starting **January 1, 2026**, remittance transfers via cash, money orders, cashier’s checks, or similar physical instruments will be subject to a **1% federal excise tax**. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-remittance-transfer-providers-who-fail-to-deposit-excise-tax-under-the-one-big-beautiful-bill?utm_source=openai)) Providers must make semimonthly deposits and file quarterly excise tax returns. The first semimonthly deposit is due **January 29, 2026**. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-remittance-transfer-providers-who-fail-to-deposit-excise-tax-under-the-one-big-beautiful-bill?utm_source=openai))
However, recognizing implementation challenges, the IRS will provide **penalty relief for the first three quarters of 2026** if providers:
- make timely deposits (even if calculations are imperfect), and
- pay any underpayment by the due date of Form 720 for that quarter. Also, safe-harbor rules apply if reasonable cause is shown. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-remittance-transfer-providers-who-fail-to-deposit-excise-tax-under-the-one-big-beautiful-bill?utm_source=openai))
## What You Should Do to Stay Compliant
1. Update reporting systems now to track remittance transfers with taxable status.
2. Ensure your accounting/pay-roll departments understand the excise tax and filing schedule.
3. For remittance senders and recipients: request or keep accurate documentation to distinguish whether funds fall under taxable remittance rules.
4. Stay tuned to IRS guidance via Form 720 instructions and Notice 2025-55.
## Timeline at a Glance
| Date | Change | Notes |
|---|---|---|
| Sept 30, 2025 | Paper refund checks phase out kicks in | Electronic refunds become default unless exceptions apply. ([irs.gov](https://www.irs.gov/newsroom/irs-to-phase-out-paper-tax-refund-checks-starting-with-individual-taxpayers?utm_source=openai)) |
| Jan 1, 2026 | Excise tax on applicable remittance transfers begins | Safe harbor relief for first three quarters of tax deposit rules. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-remittance-transfer-providers-who-fail-to-deposit-excise-tax-under-the-one-big-beautiful-bill?utm_source=openai)) |
| Jan 29, 2026 | First semimonthly deposit due for remittance tax | Timing important for compliance. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-remittance-transfer-providers-who-fail-to-deposit-excise-tax-under-the-one-big-beautiful-bill?utm_source=openai)) |
## Real-World Scenarios
- **Unbanked individual filing 2025 return**: If no direct deposit info is provided and no exception applies, your refund may be delayed. Best to get banking info and submit via online account.
- **Remittance service provider**: Implement tracking and deposit workflow now so that your system can identify taxable remittances and prepare semimonthly deposits. Use transitional relief wisely, but don’t wait until end of quarter.
## Conclusion
These compliance changes are fast approaching. The move away from paper is permanent and required by law. Similarly, remittance tax and associated reporting requirements introduce new burdens but also progressive relief while you adapt. Start early, keep documentation clean, and consult guidance like Notice 2025-55.