Executive Order Ending Paper Checks for Federal Payments and Tax Refunds

Written by Rashmi Saraogi, CPA, MST + EA LMC Senior Tax Manager

President Donald Trump issued an executive order (EO) on March 25, 2025, titled “Modernizing Payments to and from America’s Bank Account.”

Effective September 30, 2025, this executive order mandates that the Department of the Treasury cease issuing paper checks for disbursements from the federal government. These include:

• Tax refunds
• Social Security benefits
• Other government disbursements like unemployment insurance, government contracts and grants, etc.

This EO also mandates that all payments made to the federal government be processed electronically, including:

• Taxes – individual income tax, payroll tax, corporate income tax, and estate and gift tax
• Fees
• Fines
• Loan repayments

Exceptions and Support

The executive order allows limited exceptions with prior approval for:

• Individuals without access to banking or electronic payment systems
• Emergency scenarios where electronic funds transfer (EFT) would cause hardship
• National security, or law enforcement needs

The Purpose of Ending Paper Checks

This initiative is designed to reduce costs, minimize fraud risk, prevent lost payments and theft, and improve the efficiency of government transactions.

While all industries that interact with the federal government will be affected in some way, the industries most impacted by the elimination of paper checks under this executive order are those that heavily rely on federal disbursements or contracts, including a high number of small or disadvantaged businesses that still rely on traditional (paper-based) financial processes.

Compliance

To comply with the new federal mandate and receive and make payments electronically from and to the U.S. government, businesses and individuals must take a few key steps to establish and validate their digital payment infrastructure.

Active Bank Account or Digital Payment Option

You must have access to one of the following options:

• A checking or savings account at a financial institution that supports direct deposit or direct payment
• A prepaid debit card account (often used by unbanked individuals).
• A digital wallet (like PayPal, or Cash App, if approved by the Treasury).
• Access to a real-time payments (RTP) platform.

Businesses must use accounts registered under their legal business name and cannot use personal accounts.

Article Sources

The Executive Order can be found here, along with the corresponding White House fact sheet available here.

For more information or questions, please reach out to your LMC professional.