Learning Center
We keep you up-to-date on the latest tax changes and news in the industry.
IRS Shifts to Paperless Refunds: What This Might Mean for You
In a move set to redefine the refund process, the Internal Revenue Service (IRS), in collaboration with the U.S. Department of Treasury, has announced the gradual phasing out of paper tax refund checks starting September 30, 2025, as mandated by Executive Order 14247. This transition to electronic refunds marks a significant shift aimed at modernizing the system to enhance efficiency and security. However, it brings with it a complex set of challenges, especially for individuals who are unbanked or underbanked. Here, we delve into what this means for taxpayers and explore the options available for those without access to traditional banking services.
The Impetus Behind the Transition
The transition to electronic refunds is based on several compelling advantages. Compared to paper checks, electronic payments are over 16 times less likely to be lost, stolen, or delayed, offering a more secure method for taxpayers to receive their refunds. Faster IRS processing times also mean that electronic refunds can be issued in less than 21 days if the returns are filed electronically and there are no issues, as opposed to the several weeks it can take for non-electronic payments.
Additionally, the cost benefits are significant. Electronic payments reduce the costs associated with printing and mailing checks, thus allowing the Treasury to allocate resources more efficiently. During the 2025 tax season, a substantial 93% of federal tax refunds were already processed through direct deposit, indicating broad acceptance and feasibility of going paperless for the majority. This was accomplished because these taxpayers included their banking information on the tax returns they filed.
Challenges Facing Unbanked Taxpayers
Despite these benefits, the transition presents distinct challenges for the approximately 7% of recipients who still depend on paper checks. For many, especially those without current banking services, this shift necessitates urgent attention to viable alternatives such as prepaid debit cards and digital wallets.
The American Bar Association (ABA) has voiced concerns regarding the rapid timeline of this transition, cautioning that un- and underbanked individuals may face unforeseen difficulties. The ABA has recommended that steps be taken to expand access to basic banking services and to educate the public on the potential risks associated with prepaid cards, which can sometimes incur higher fees and offer less consumer protection.
Moreover, the Tax Law Center has highlighted that prepaid cards, while a solution, might not be the most efficient option due to the nature of annual tax refunds in contrast to monthly benefits traditionally paid via prepaid methods. They stressed the need for careful implementation to avoid costs potentially outweighing the benefits.
Proposed Solutions and Alternatives
To address these challenges, several recommendations and initiatives can help bridge the gap for those without a banking presence:
Prepaid Debit Cards: These cards offer an immediate solution that doesn't require a traditional bank account. However, taxpayers should be aware of any associated fees and the process for reissuing cards for annual tax refunds.
Digital Wallets: Services such as PayPal and mobile banking apps are viable options for receiving electronic payments. These platforms can be accessed with minimal initial setup, offering an alternative to bank accounts.
BankOn Initiative: This program aims to provide low- or no-cost banking services to underserved communities. Taxpayers are encouraged to explore accounts certified by the BankOn initiative which feature low fees and no minimum balance requirements.
FDIC’s GetBanked Resources: Taxpayers can visit the FDIC's GetBanked website for guidance on opening a simple bank account. Many institutions offer accounts with nominal fees and requirements, which can be an excellent start for those new to banking.
International Considerations: For taxpayers abroad, the current policy restricts direct deposits into foreign bank accounts. While advocacy continues for changes to allow international ACH transfers, relying on existing accounts within the U.S. remains a suggested pathway.
The IRS's move to paperless refunds is both a forward-looking initiative and a logistical challenge, particularly for unbanked populations. The transition's success hinges on making sure all taxpayers are adequately informed and have access to alternative financial services. By exploring and promoting viable solutions, taxpayers can mitigate potential disruptions in their refund process and embrace the efficiency of electronic payments.
This change will not affect taxpayer’s already receiving paperless refunds. Contact this office with questions.
Want our best tax and accounting tips and insights delivered to your inbox?
Sign up for our newsletter.
Benefits of having a business advisor
Your CFO, Reimagined as a Financial Doctor
Diagnosing root causes, prescribing solutions, and guiding your property business toward long-term wealth.
Our CFO | Advisor
Raquel is a passionate business owner. Now, she is returning to her grassroots with a twist - guiding clients with her expertise as a CPA, she can advise your company as your trusted CFO and Advisor.
-
Raquel Deodanes, MS, CPA
Co-Founder✅ CPA with Real-World Experience – I help property managers stay profitable, tax-efficient, and cash flow positive.
✅ Tax Strategist – Former advisor at California’s revenue agency.
✅ Trusted by 4,000+ Businesses – Experience across CA, FL, TX, NV, and beyond.
✅ Real Estate Investor – I understand the financial realities of property management.
✅ Entrepreneur – I’ve built businesses and know the challenges you face.
Frequently Asked Questions
-
We diagnose financial inefficiencies, treat problems like poor cash flow or rising costs, and guide you to long-term financial health. That includes cleaning up your books, forecasting cash flow, optimizing operations, and helping you grow your portfolio with confidence — just like a doctor builds a custom care plan for a patient.
-
Bookkeepers record transactions. CPAs file your taxes. We connect the dots — helping you understand your numbers, strategically improve them, and make smarter decisions throughout the year. We work alongside your existing team to drive performance, not just compliance.
-
If you're unsure where your cash is going, struggling with rising costs, planning to scale, or just tired of reacting instead of planning — now is the right time. We help you get ahead of problems, not just clean up after them.
-
Clients typically see improved cash flow, cleaner books, higher NOI, better financial reporting, and a lot less stress at tax time. More importantly, you gain clarity, confidence, and control over your business — and a partner who helps you grow it.
Pricing
Painless, transparent pricing.
Let us take away your stress and give you back your time. Choose your perfect package today.
Base
-
Dedicated finance expert
-
Bookkeeping with accrual basis
-
Includes P&L, balance sheet, and cash flow statements
Core
-
Includes everything in Base, PLUS
-
Industry KPIs and financial ratios
-
Monthly virtual 1-hr meetings
-
Monthly rolling budget forecasts
Growth
-
Includes everything in Base, CORE
-
Budget vs. actuals variance analysis and review
-
Payroll and HR Platform