Effective October 1, 2025

The Internal Revenue Service has implemented a significant procedural change affecting all taxpayers, fiduciaries, and estates: as of October 1, 2025, the IRS no longer accepts paper checks for tax payments or issues paper check refunds. This mandate, stemming from an Executive Order signed in March 2025, represents a fundamental shift in tax remittance procedures and requires immediate action from taxpayers who have not yet transitioned to electronic payment methods.

Scope and Applicability

The prohibition on paper check processing applies comprehensively to:

• Individual taxpayers filing Form 1040 returns
• Trusts and estates filing Form 1041 fiduciary returns
• All estimated tax payment obligations
• Tax liabilities associated with both timely-filed and extended returns

What Changed on October 1, 2025

All tax payments and refunds processed by the IRS must now be conducted electronically. Paper checks are no longer accepted for any purpose, including:

• Estimated Tax Payments: All quarterly estimated tax payments, beginning with the fourth quarter payment due January 15, 2026
• Tax Return Payments: All tax liabilities accompanying filed returns, regardless of fiscal year or extension status
• Refund Distributions: The IRS will no longer issue paper refund checks (subject to certain limitations discussed below for fiduciary returns)

Taxpayers who submitted paper checks for third-quarter estimated tax payments (due September 15, 2025) or extended fiduciary returns filed by September 30, 2025, were able to utilize paper checks for those final submissions.

Estimated Tax Payment Procedures

For taxpayers who have historically remitted quarterly estimated tax payments via paper check, electronic alternatives must be implemented beginning with the fourth quarter payment due January 15, 2026:

IRS Direct Pay: The IRS Direct Pay system allows taxpayers to schedule electronic payments directly from their bank accounts without pre-registration. This platform provides confirmation numbers and payment tracking capabilities.

Electronic Federal Tax Payment System (EFTPS): EFTPS requires advance enrollment but offers enhanced functionality for recurring payments and payment scheduling. Taxpayers using EFTPS must enroll at least one week prior to their initial payment deadline to ensure proper processing.

Financial Institution Services: Many banks and investment advisors currently utilize electronic payment systems, including EFTPS and IRS Direct Pay, on behalf of clients. Taxpayers should confirm their financial institution’s electronic payment capabilities and authorize appropriate arrangements.

Tax Return Processing with Electronic Funds Transfer

Form 1040 Individual Returns: Most tax preparation software accommodates electronic funds transfer (EFT) authorization for both tax payments and refund deposits. For taxpayers filing extended 2024 returns or other individual returns going forward:

• Returns with outstanding tax liability require bank account information for automatic withdrawal
• Returns generating refunds that are not being applied to subsequent tax year obligations require bank account information for direct deposit
• Decedents’ final returns necessitate particular attention to EFT authorization

2026 Estimated Tax Obligations: For taxpayers whose 2025 Form 1040 returns are electronically filed by April 15, 2026, quarterly estimated tax payments for 2026 may be authorized through the return itself, enabling automatic quarterly withdrawals without separate payment submissions.

Fiduciary Return Special Considerations

The transition to mandatory electronic processing presents unique complications for Form 1041 fiduciary returns:

Tax Payments: Many tax preparation platforms support electronic withdrawal authorization for fiduciary return tax liabilities.

Refund Processing: The IRS has not implemented direct deposit functionality for Form 1041 refunds, despite the Executive Order mandate. Current IRS guidance does not address refund distribution procedures for returns filed after the October 1, 2025, implementation date. Based on communications with tax software providers, no platform updates supporting direct deposit for fiduciary returns are currently available.

This creates an unresolved procedural gap: fiduciary returns generating refunds lack a clear electronic distribution mechanism under the new rules. We anticipate the IRS will either issue supplemental guidance establishing alternative refund procedures or will release form modifications for the 2025 tax year to incorporate direct deposit information for fiduciary refunds. Until such guidance is published, practitioners should monitor IRS communications regarding Form 1041 refund processing.

Immediate Action Items for Taxpayers and Fiduciaries

To ensure compliant tax payment processing and efficient refund receipt under the new electronic-only requirements, taxpayers and fiduciaries should:

1. Establish Electronic Payment Capabilities: Contact financial institutions and investment advisors to confirm electronic tax payment services are in place and establish necessary authorizations for upcoming payments.
2. Enroll in EFTPS: For taxpayers preferring direct IRS payment submission, initiate EFTPS enrollment immediately. Enrollment requires approximately one week for processing completion before the first payment can be submitted.
3. Provide Banking Information to Tax Advisors: Coordinate with tax advisors to supply accurate bank account information for any pending returns that will generate payments or refunds.
4. Prepare for Fourth Quarter Estimated Taxes: The fourth quarter 2025 estimated tax payment due January 15, 2026, must be submitted electronically. Taxpayers should establish their preferred electronic payment method before year-end.
5. Monitor IRS Guidance: The IRS may release additional procedural clarifications, particularly regarding Form 1041 refund processing. Taxpayers should maintain communication with their tax advisors regarding evolving guidance.
6. Review Fiduciary Procedures: Trustees and personal representatives should evaluate current tax payment and refund procedures to ensure full alignment with electronic processing requirements, particularly given the uncertainty surrounding refund distributions.

The elimination of paper check processing represents a significant modernization of IRS payment infrastructure now in effect as of October 1, 2025. Taxpayers who have not yet established electronic payment mechanisms must do so immediately to avoid processing delays or penalties for upcoming tax obligations, including fourth-quarter estimated tax payments due in January 2026.

Dawda PLC continues monitoring IRS guidance and platform developments to ensure our clients maintain seamless tax compliance under these new requirements. Taxpayers with questions regarding electronic payment implementation or specific circumstances affecting their tax obligations should consult with their tax advisors to develop appropriate compliance strategies.

For additional information regarding electronic tax payment options or assistance with tax compliance matters, please contact Dawda PLC’s Tax Practice Group.