Federal Paper Checks Are Being Phased Out: Here’s What You Need to Do Before September 30, 2025
The IRS will stop issuing paper refund checks for individual taxpayers on September 30, 2025, but here’s what’s creating the main concern for American expats: the IRS still won’t deposit tax refunds into foreign bank accounts. This means that while the IRS eliminates paper refund checks, expats without U.S. accounts will need to use alternative electronic payment methods. The IRS has committed to providing options such as prepaid debit cards, digital wallets, and limited exceptions, with detailed guidance coming before the 2026 filing season.
Without proper setup, you could face significantly longer delays versus electronic payments, with October 15 extension filers facing the most immediate risk.
The good news is that you can easily solve this problem by setting up a U.S. bank account or electronic payment method before the deadline. Most expats end up owing little to nothing in federal taxes after applying the Foreign Earned Income Exclusion and Foreign Tax Credit, so this change primarily affects how you receive refunds, not whether you’ll owe taxes.
The IRS will publish detailed guidance for 2025 tax returns before the 2026 filing season begins. Until further notice, taxpayers should continue using existing forms and procedures, including those filing their 2024 returns on extension of a due date prior to Dec. 31, 2025.
Why Is the U.S. Government Phasing Out Paper Checks?
The IRS decision stems from cost efficiency and security concerns outlined in Executive Order 14247. According to the Treasury, paper checks are over 16 times more likely to be lost, stolen, altered, or delayed than electronic transfers. Additionally, electronic refunds give taxpayers faster access to their money, with payments issued in less than 21 days when filing electronically and choosing direct deposit (assuming no issues with the return). In contrast, non-electronic payments may take 6 weeks or longer for refunds sent by mail.
This modernization effort affects IRS tax refunds specifically, following Executive Order 14247 (Modernizing Payments To and From America’s Bank Account), which mandates this transition by September 30, 2025. The change also applies to payments made TO the IRS, though taxpayers should continue using existing payment options until further notice.
What Happens After September 30 if I Don’t Have U.S. Direct Deposit?
The IRS has announced that for taxpayers without traditional U.S. bank accounts, several alternatives will be available:
- Prepaid debit cards with U.S. routing numbers
- Digital wallets that can receive electronic payments
- Limited exceptions for qualifying circumstances
- Detailed guidance will be published before the 2026 filing season
Currently, 93% of individual refunds are already issued through direct deposit, with only 7% still receiving paper checks.
The timing becomes particularly critical for those filing October 15 extensions. Taxpayers should continue using existing forms and procedures until further notice, including those filing their 2024 returns on extension before December 31, 2025.
Here’s the realistic timeline comparison:
- Electronic Payment: Less than 21 days for direct deposit
- Traditional Mail Process: 6 weeks or longer, plus additional international delivery and foreign bank clearance time
The IRS will provide comprehensive guidance on available alternatives before the transition takes effect, eliminating uncertainty about payment options for expats without U.S. accounts.
If you need help with setup, call the Electronic Payment Solution Center at 1-877-874-6347. This is the government’s main enrollment hotline for switching from paper checks to electronic payments.
How Can I Set Up Electronic Payments as an Expat?
The IRS requires a U.S. account for direct deposit, so here are the practical options most expats use. The most reliable solution is establishing a U.S. bank account. Many traditional banks require U.S. residential addresses, but you need an institution that provides:
- U.S. routing number (9-digit ABA number)
- U.S. account number
- Acceptance of non-resident customers
Types of Solutions Expats Commonly Use:
- Digital-First Banks: Many online banks accept international applicants and don’t require U.S. addresses. Look for institutions that specifically serve expatriates or have international programs.
- Global Banking Platforms: Some multinational banks offer accounts accessible from multiple countries, though they typically require higher minimum balances.
- Credit Unions: Certain credit unions, particularly those serving international communities, accept expat members and offer competitive services.
IRS-Endorsed Electronic Alternatives:
Based on the IRS announcement, these options will be available for those without traditional banking:
- Prepaid Cards with U.S. Routing Numbers: Cards like Serve, American Express, or Visa prepaid cards that can receive IRS direct deposits
- Digital Wallets: Electronic payment platforms that can receive government payments
- Direct Express Debit Card: For federal benefits, this Treasury-sponsored prepaid card is specifically designed for receiving federal payments electronically
Will Identity Verification Affect My Refund Processing?
This year, the IRS has expanded identity verification requirements before processing refunds. While the IRS states this is to reduce fraud, the verification process can create additional delays – especially for expats who may have difficulty providing U.S.-based verification documents.
The verification process may require you to:
- Verify your identity through ID.me or by phone
- Provide additional documentation about your income or tax situation
- Answer questions about your tax history
For expats, this creates another layer of complexity. If the IRS flags your return for identity verification, you may face longer processing times, particularly if you’re filing from overseas with foreign income sources or addresses.
If you receive an Identity Protection PIN (IP PIN), this can actually help streamline the process. The IP PIN is a six-digit code that confirms your identity when filing. While initially issued to victims of identity theft, having an IP PIN can reduce verification delays.
The key point for expats is that having your electronic payment information ready becomes even more important when identity verification might delay your refund processing by weeks or months beyond the normal timeline.
Do I Need to Report My New U.S. Bank Account on the Foreign Bank Account Report (FBAR)?
If you open a U.S. account to receive your refund, you might wonder whether this creates new reporting requirements. Here’s the simple answer: Your new U.S. bank account will not need to be reported on your FBAR (Foreign Bank Account Report) because it’s not a foreign account. However, if your existing foreign accounts exceed $10,000 in total at any point during the year, you’ll still need to file an FBAR.
This change doesn’t affect your core tax obligations or the powerful protections available to expats. You’ll still be able to use:
- Foreign Earned Income Exclusion to exclude up to $130,000 of foreign earnings (2025)
- Foreign Tax Credit for taxes paid to other countries
- Standard expat tax benefits that typically result in owing little to no U.S. taxes
In short, adding a U.S. account simplifies your banking while maintaining your expat tax advantages.
How Do Other Federal Agencies Handle International Payments?
You might assume all federal agencies follow the same rules, but that’s not the case. Here’s how Social Security and Veterans Affairs differ from the IRS:
Unlike the IRS, both Social Security and Veterans Affairs have robust International Direct Deposit (IDD) programs:
- Social Security Administration: Offers direct deposit to U.S. accounts or International Direct Deposit to banks in countries with formal agreements. They also provide the Direct Express prepaid debit card for those without traditional accounts.
- Veterans Affairs: Operates comprehensive International Direct Deposit covering numerous countries, with market exchange rates and currency conversion fees covered by the Treasury.
In short, most federal agencies already offer international direct deposit – the IRS is the exception.
What Should October 15 Extension Filers Do Right Now?
If you plan to file by the October 15 extension deadline, time is running out to set up electronic payments. Here’s your action plan:
Immediate Steps:
- Choose an expat-friendly bank or prepaid card option
- Gather required documentation (identification, address verification)
- Complete the account application process
- Obtain your routing and account numbers
When Filing Your Return: Enter your new U.S. account information on your tax return for direct deposit. The IRS cannot accept direct deposit information after a return is filed, so this must be done during the filing process.
If You Haven’t Set Up Electronic Payments: The IRS will publish detailed guidance before the 2026 filing season on available alternatives including prepaid debit cards, digital wallets, and limited exceptions for those unable to establish traditional banking relationships
Are There Scam Risks During This Transition?
Yes. Significant policy changes often bring new scams, and during this transition, expats are especially targeted since they’re less familiar with U.S. government procedures. Here’s what to watch for, plus how to protect yourself:
- Unsolicited emails or texts claiming to be from Treasury or IRS
- Requests to “update” payment information via email links
- Offers to “expedite” the transition for a fee
- Fake checks requiring you to wire money back
Always verify communications by contacting agencies directly using official phone numbers from their websites. The IRS will never initiate contact via email, text, or social media to request personal information.
Report suspected fraud to:
- IRS-related scams: phishing@irs.gov
- Treasury fraud: Office of Inspector General at 1-800-359-3898
- General fraud: Federal Trade Commission at ReportFraud.ftc.gov
What If I’m Behind on Tax Filings?
If you haven’t filed recent tax returns, don’t let this payment change delay you further. The Streamlined Filing Compliance Procedures help expats catch up on taxes penalty-free if your non-compliance was non-willful.
This program allows you to file the last three years of tax returns and six years of FBARs without facing the usual penalties. Most expats who use this program discover they owe little to no taxes after applying available exclusions and credits.
The bottom line is that catching up is easier than you think, and most expats discover they owe nothing after applying available protections.
Your Next Steps: Making This Simple
The paper check elimination doesn’t need to create stress. Here’s what to do:
This Week:
- Decide between expat-friendly banks or prepaid card options
- Start the account application process
- Request routing and account numbers once approved
Before October 15: Include your new account information when filing your expat tax return
Going Forward: Update your information with any federal agencies that send you benefits
Remember that approximately 2 out of 3 expats end up owing nothing in federal taxes after applying available exclusions and credits. This change primarily affects how you receive refunds, not whether you’ll have tax liability.
The transition to electronic payments represents long-overdue modernization that will ultimately make your financial life simpler and more secure. The IRS has committed to providing clear guidance and multiple alternatives to ensure all taxpayers can receive their refunds electronically.
If you need help with the tax filing process or want to ensure you’re maximizing your expat tax benefits, professional guidance can save both time and money while ensuring full compliance with U.S. tax obligations.
If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions on expat taxes or working with Greenback, contact our Customer Champions.
Whether you’re years behind or just unsure about the thresholds, our team is ready to help.
This article provides general information about IRS refund policy changes and is not intended as personalized tax advice. Tax situations vary significantly among individuals, and government policies may change after publication. For guidance specific to your circumstances, consult with a qualified tax professional who specializes in expat tax matters. While we strive for accuracy, readers should verify all information with official government sources before making financial decisions.
