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Executive Order Mandating Electronic Federal Tax Refunds and Payments for Taxes

Beginning as early as September 30, 2025, the president’s March 25, 2025, executive order “Modernizing Payments To and From America’s Bank Account”  mandates all payments to and from the US Treasury be paid electronically. This includes federal tax payments and federal tax refunds.

Timing of Electronic Tax Payments & Refund Mandate

Verbiage in the order indicates there may be a delay in implementing the order: “As soon as practicable, and to the extent permitted by law, all payments made to the Federal Government shall be processed electronically, except as specified in section 4 of this order.”

The order also indicates all federal tax refunds shall be issued by electronic means beginning September 30, 2025.

Will There be a Transition Period?

Presumably, when the electronic tax payment requirements are implemented, we may be advised that all tax year 2024 payments, prior year, and 2025 estimated tax payments—up to and including 4th quarter estimated tax payments due January 15, 2026—may be eligible to be paid by paper check or money order as a transition period for the order.

However, payments for subsequent tax years and tax payments made for 2024 and prior years after a specific date—perhaps January 15, 2026—are expected to be required to be paid electronically or be subject to penalties unless the taxpayer is eligible for one of the exceptions below.

Tax Practitioners’ Caution: Form 1040 Filed by Oct 15 & 4th Quarter 2025 Estimated Tax

Tax practitioners should be aware of challenges related to the proposed September 30, 2025 implementation date for mandatory electronic payments. While a transition grace period is expected, two specific taxpayer groups may face penalties if electronic payment requirements are implemented without accommodations:

  1. Taxpayers filing Form 1040 on extension (due October 15) with a balance due
  2. Taxpayers making fourth quarter 2025 estimated tax payments after September 30, 2025

If payments from these groups are not submitted electronically after the implementation date, penalties may apply. Tax professionals should proactively discuss electronic payment options with affected clients to ensure compliance with these potential requirements.

Methods For Electronic Payments

  1. direct deposits;
  2. debit and credit card payments;
  3. digital wallets and real-time payment systems; and
  4. other modern electronic payment options.

Limited Exceptions Available

According to the executive order, when electronic payment and collection methods are not feasible, alternative options “shall be provided.” Listed exceptions include: 

  1. individuals who do not have access to banking services or electronic payment systems;
  2. certain emergency payments where electronic disbursement would cause undue hardship, as contemplated in 31 C.F.R. Part 208;
  3. national security- or law enforcement-related activities where non-EFT transactions are necessary or desirable; and
  4. other circumstances as determined by the Secretary of the Treasury, as reflected in regulations or other guidance.