Paper Tax Refund Checks Fell From 7% to Under 2% in One Filing Season

Through March 20 of the 2026 filing season, over 98 percent of the 57 million federal tax refunds the IRS had issued went out by direct deposit. One season earlier, paper checks were still 7 percent of individual refunds: about 6.5 million checks out of the 93.5 million refunds issued during the 2025 filing season. Between those two seasons sits Executive Order 14247, signed March 25, 2025, which directed the Treasury to stop issuing paper checks for federal disbursements, tax refunds included, effective September 30, 2025. The 2026 season (tax year 2025 returns, filed January through April 2026) was the first run under that order, and what follows is the record of how it went, not a forecast.

The order, and the statutory gap it had to cross

The order's stated case against the check is specific. Treasury checks are 16 times more likely to be reported lost or stolen, returned undeliverable, or altered than an electronic funds transfer, and maintaining the physical infrastructure and technology for digitizing paper records cost over $657 million in fiscal year 2024 alone. Section 4 carves out exceptions for people without access to banking services or electronic payment systems, for emergency payments where electronic disbursement would cause undue hardship, for national security and law enforcement needs, and for anything else the Treasury Secretary designates.

Tax refunds needed the executive order because statute never reached them. The electronic-funds-transfer mandate at 31 U.S.C. §3332(f)(1) requires most federal payments to move electronically, and it exempts payments made under the Internal Revenue Code — the carve-out that kept refund checks lawful long after most other federal payments went electronic. The final rule titled "Electronic Refunds" that did land in the Federal Register (January 2, 2026, effective February 6, 2026) belongs to U.S. Customs and Border Protection and covers refunds of customs duties and fees owed to importers; income tax refunds are outside it. An earlier version of this article read that rulemaking as covering tax refunds; see Corrections. The IRS instead moved by announcement and by procedure: IR-2025-94 set the phase-out for individual refunds beginning September 30, 2025, and the agency's Q&A on the order, updated January 27, 2026, supplied the mechanics for the filing season.

How the first season ran

The IRS opened the season on January 26, 2026, expecting about 164 million individual returns for tax year 2025, and told filers that most would need to put routing and account numbers on the return to get a refund. For a return that arrived without them, the published procedure ran three steps:

1. The refund goes on hold, and the filer gets a CP53E notice asking for banking information, or an explanation of why they cannot provide it, within 30 days.
2. A filer who responds with an account gets direct deposit.
3. A filer who does not respond, on a return with no other issues, gets a paper check six weeks after the notice date, and a check generally takes one to three weeks longer to process than a direct deposit.

So the paper check was not abolished. It became the option of last resort, issued only after a notice goes unanswered.

In practice, few taxpayers took that path. Through March 20, about one percent of taxpayers had received a CP53E notice. Over 80 percent of the season's refunds were issued in under 21 days, and the average refund stood at $3,571, up more than 10 percent on the prior year. The sums riding on this plumbing are large: across all taxpayers, the IRS issued $638.8 billion in refunds in fiscal year 2025.

Where the cutoff lands hardest

A refund default that assumes a bank account presses on the households that have none. In the FDIC's most recent national survey (2023, published November 2024), 4.2 percent of U.S. households (about 5.6 million) had no checking or savings account at a bank or credit union. That share is a national average over state figures that span an order of magnitude:

A Mississippi household was ten times as likely as a Vermont household to have no account for a refund to land in. These are survey estimates with stated uncertainty (the 90 percent confidence interval on Mississippi's 9.4 runs from 7.7 to 11.3), and the survey counts households while the CP53E figure counts taxpayers, so the two shares sit beside each other rather than on the same denominator. The comparison still says where the policy's friction concentrates: in the states along the Gulf, not the ones along the upper Connecticut River.

What an unbanked filer can do, per the IRS's own guidance: a refund can be deposited to a prepaid debit card or mobile-app account that carries a routing and account number, and the agency points people to FDIC GetBanked and MyCreditUnion.gov for free or low-cost accounts. The Q&A promises "limited exceptions" for hardships and legal or procedural requirements, but names no form and no phone line for requesting one; the CP53E path is, as published, how a filer without an account ends up with a check. Direct Express, the Treasury's prepaid Mastercard for Social Security, SSI and veterans' benefits (issued by Fifth Third Bank), is the benefits-side answer to the same order; the Treasury's page does not offer it for tax refunds.

The bank lines on the 2025 return

On the tax year 2025 Form 1040, the refund block is lines 35a through 35d: the refund amount on 35a, the routing number on 35b, the account type (checking or savings) on 35c, and the account number on 35d. A refund can be split across up to three accounts using Form 8888, whose checkbox sits on line 35a, and no more than three electronic refunds can go into any single account or prepaid card. The IRS puts the cost difference plainly: more than $1 to issue a paper refund check, a dime for a direct deposit.

The rules the order did not touch

Refund timing law is unchanged. Refunds claiming the Earned Income Tax Credit or Additional Child Tax Credit cannot be issued before mid-February, and the hold covers the entire refund; for early 2026 filers with e-file, direct deposit and a clean return, the IRS said to expect the refund by March 2. The Where's My Refund tool tells e-filers to expect refund information within 3 weeks of filing, and paper filers 6 or more weeks from when the IRS receives the return. Amended returns still take 8 to 12 weeks to process, and up to 16.

Free filing for the 2026 season meant four routes: Free File software for 2025 adjusted gross income of $89,000 or less, Free File Fillable Forms at any income, MilTax for the military community, and VITA/TCE sites. Direct File is not on the 2026 list.

Money moving the other way is on a slower clock. IRS Direct Pay takes payments from a bank account free, with no sign-in, and payment plans can be set up online for balances under $100,000 short-term or $50,000 or less long-term. But the Q&A says checks and money orders mailed to the IRS are still accepted for now, and business refunds keep paper longer too: the IRS is adding direct deposit to most business return types first, with elimination to follow "over time." So far the order bites only on the individual refund side: for the roughly one filer in a hundred who drew a CP53E notice this season, the paper check still exists — six weeks after the notice, plus the one to three weeks a check spends in processing that a direct deposit skips.

This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.