The writing is on the wall or should I say checks, that the end to government paper checks (too and from) will soon be a distant memory.
On March 25,2025, President Donald Trump signed an executive order mandating the U.S. federal government to phase out paper checks for all disbursements and receipts by September 30, 2025. This initiative aims to modernize payment systems, reduce costs, and mitigate risks such as fraud and inefficiencies associated with paper-based transactions.
Although we fully support the initiative the end of September seems a bit optimistic, but who knows. Here is what we do know:
Scope of the Executive Order
The order covers all federal disbursements, including:
- Tax refunds
- Social Security benefits
- Vendor payments
- Intergovernmental transfers
- Other government payouts
Payments made to the federal government—such as taxes, fees, fines, and loans—must also transition to electronic formats wherever legally permissible. I’m sure the “legally permissible” portion will be heavily debated.
Implementation Details
Federal departments and agencies are required to adopt electronic funds transfer (EFT) methods such as:
- Direct deposit
- Prepaid cards
- Debit/credit card payments
- Digital wallets (this seems to assume crypto which supports current political priorities)
- Real-time transfers
Treasury Secretary Scott Bessent must deliver an implementation plan within 180 days. Physical lockbox services used for paper-based payment processing will be phased out.
Exceptions
Limited exceptions will apply in specific cases:
- Individuals without access to banking or electronic payment systems
- Emergency payments
- Situations involving national security or law enforcement activities
We are anxious to see how these expectations apply, since the biggest demographic affected are seniors. This is also the highest targeted group for the scammers, so we hope many safeguards are built into the system and we should all watch after the ones close to us.
Public Awareness Campaign
A comprehensive campaign will inform federal payment recipients about the transition and provide guidance on setting up digital payment options. We expect the federal government will do its normal public relations campaign with a heavy emphasis on social media campaigns. I am hopeful that they will leave us a lot of leeway for those taxpayers that misstep and not follow some of the outlandish and punitive measures some states like California have followed.
Rationale for the Change
The order cites significant issues with paper checks:
- Paper checks are 16 times more likely to be lost, stolen, or altered compared to EFTs.
- Check fraud has increased substantially in recent years; banks reported nearly 680,000 cases in 2022—double the number from 2021.
- Maintaining infrastructure for paper-based payments cost taxpayers $657 million in fiscal year 2024.
Impacts
The shift is expected to streamline government operations and reduce waste, fraud, and abuse. However, it may disrupt vulnerable populations who rely on paper checks. For example, nearly 456,000 Americans still receive Social Security payments via paper checks as of March 2025. Again, this is the highest effected area, so we are hopefully that it is implemented affectively.
Benefits of the Transition
Understanding and adapting to these changes can ensure a smooth transition and take advantage of the benefits of electronic payments. The shift to electronic payments offers several advantages:
- Speed: Transactions are processed faster than paper checks.
- Cost Savings: Reduces administrative costs for taxpayers, businesses, and government agencies.
- Environmental Impact: Eliminates the need for paper, contributing to sustainability efforts.
This is a great idea that should be done. However, how we do it will really matter.
To stay compliant, start preparing now by setting up electronic payment methods, upgrading systems, and monitoring IRS guidance. For more information, visit the IRS website or let us know if you have any questions or concerns.
We will keep you informed as the implementation plan begins to take shape. If you have any questions in the meantime, please do not hesitate to contact us.
