Top 21 Questions Expats Have About the IRS Phasing Out Paper Checks

The IRS announced on September 23, 2025, that it is phasing out paper refund checks for individual taxpayers. This change specifically affects IRS tax refunds, following Executive Order 14247, signed on March 25, 2025. Other federal agencies have their own timelines and policies for electronic payment transitions.

Your personal banking remains unchanged. Private businesses and individuals can still use paper checks, and you can continue writing checks or receiving them from non-government sources. For expats, this primarily affects IRS tax refunds, which have been reliably mailed overseas for decades.

September 30, 2025, marks the cutoff date for IRS paper refund check processing. The IRS has stated that taxpayers should continue using existing forms and procedures until further notice, including those filing their 2024 returns on extension before December 31, 2025. Detailed guidance will be published before the 2026 filing season.

This creates a timing challenge since individual taxpayers’ October 15 extension deadline overlaps with the new electronic-only period.

The IRS aims to reduce fraud, cut costs, and improve payment security. The numbers are striking: paper checks are over 16 times more likely to be lost, stolen, altered, or delayed compared to electronic transfers. Electronic refunds also 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), whereas non-electronic payments may take 6 weeks or longer for refunds sent by mail.

The IRS has committed to providing alternatives for international taxpayers, including prepaid debit cards, digital wallets, and limited exceptions, addressing the gap between policy goals and practical implementation for expats.

All federal disbursements fall under this change: tax refunds, Social Security benefits, Veterans Affairs payments, federal salaries, contractor payments, and benefit programs. Interestingly, payments under the Internal Revenue Code were excluded explicitly from previous electronic payment mandates, raising legal questions about the Treasury’s authority to eliminate tax refund checks.

The most relevant payments for expats are IRS tax refunds and Social Security benefits. Veterans living abroad will also need to transition to VA payment methods.

No, only federal government payments are affected. Banks continue offering checking accounts, businesses can pay by check, and individuals retain full check-writing privileges. State and local governments aren’t bound by this federal directive.

This targets the federal government as a payor, not as a regulator of the broader payment system. Your personal and business banking relationships operate unchanged.

The IRS announced that paper refund checks for individual taxpayers will be phased out beginning on September 30, 2025. This is not an absolute end – the IRS has committed to providing alternatives for taxpayers without traditional banking access, including prepaid debit cards, digital wallets, and limited exceptions. Detailed guidance on these transition options will be published before the 2026 filing season.

The IRS restricts direct deposits to U.S. routing numbers, treating foreign branch accounts (even of U.S. banks) as “foreign accounts” based on physical location. This policy persists despite the Bureau of Fiscal Service successfully delivering Social Security benefits via International Direct Deposit to over 50 countries.

While technical capabilities exist for international electronic payments, the IRS has provided alternative electronic payment methods rather than direct international deposits for tax refunds. The announced alternatives include prepaid debit cards and digital wallets that can work internationally.

The timing creates challenges for extension filers. If you file your extension return in early October showing a refund, that refund will be processed under the new electronic-only rules. However, the IRS has stated that detailed guidance will be available before this transition takes effect, and alternatives will be provided for those without traditional banking access.

Remember, expats automatically receive a filing deadline of June 15, 2026, with a possible extension to October 15.

The IRS has announced that several alternatives will be available for taxpayers without U.S. bank accounts:
– Prepaid debit cards with U.S. routing numbers that can receive direct deposits
– Digital wallets that can receive electronic payments
– Limited exceptions for qualifying circumstances
– Detailed guidance on all alternatives will be published before the 2026 filing season

These options address the barriers many expats face in maintaining U.S. bank accounts, including requirements for in-person identification, U.S. mailing addresses, and ongoing documentation that’s impractical from overseas.

Electronic refunds are issued in less than 21 days when filing electronically and choosing direct deposit (assuming no issues with the return), compared to 6 weeks or longer for traditional mail delivery. The IRS has committed to providing electronic alternatives offering similar speed advantages over historical paper check delivery times.

Historical paper checks took 2-4 weeks domestically and 4-8 weeks internationally, plus additional time for foreign bank clearance. Once operational, the new electronic alternatives will likely be significantly faster.

Social Security has its own policies that are separate from this IRS announcement. Social Security already operates International Direct Deposit services, delivering benefits electronically to over 50 countries and providing a working model for international electronic payments.

If not already enrolled, Expat Social Security recipients should contact SSA to establish an International Direct Deposit. This system’s successful multi-year operation demonstrates that cross-border electronic payments are technically viable for government benefits.

Veterans Affairs has its own policies separate from this IRS tax refund announcement. Veterans abroad should contact the VA directly about their electronic payment options and International Direct Deposit availability.

Veterans abroad should contact the VA about electronic payment options and International Direct Deposit availability. The VA may offer prepaid card alternatives, though these require careful evaluation for fees and international accessibility.

Direct Express is a prepaid debit card delivering Social Security, Veterans benefits, and other federal payments. Designed for recipients without traditional bank accounts, it includes limitations: one free cash withdrawal per government deposit and fees for expedited card replacement.

For expats, Direct Express cards may have limited ATM access internationally, and usage fees could prove expensive. The IRS has indicated that similar prepaid card solutions will be available for tax refunds, though specific details will be provided in upcoming guidance.

Several banks serve U.S. expats, though account opening requirements vary. Online banks like Charles Schwab and Fidelity allow overseas account opening, while traditional banks increasingly require in-person visits for new accounts.

Credit unions may offer more flexible expat policies, particularly those affiliated with military or federal employment. Consider international ATM fee policies, wire transfer costs, account maintenance requirements, and whether the bank reports to your residence country under tax treaties.

Yes, the IRS has specifically announced that prepaid cards will be available for tax refunds as one of the electronic alternatives for taxpayers without traditional banking access. The IRS will provide detailed guidance on these prepaid card options before the 2026 filing season.

Based on government experience with Economic Impact Payment prepaid cards, consider potential challenges: activation fees, limited ATM networks, customer service accessibility, and the importance of verifying legitimate cards versus scams.

If prepaid cards become your chosen option, verify Electronic Funds Transfer Act coverage for consumer protection. Watch for fees on card replacement, international ATM usage, and balance transfers to regular banking accounts.

No, U.S. bank accounts do NOT require reporting on FBAR (FinCEN Form 114), as FBAR is specifically for foreign financial accounts. However, if your aggregate foreign account balances exceed $10,000 at any time during the year, those foreign accounts must be reported on FBAR. Depending on your filing status and residence location thresholds, the U.S. account may require reporting on Form 8938 (FATCA).

These are reporting requirements, not tax obligations. The accounts don’t create additional U.S. tax liability beyond regular interest income reporting. Many expats already handle complex FBAR and FATCA reporting, so adding a U.S. account may not significantly increase compliance burden.

The IRS has announced that limited exceptions will be available where electronic payments aren’t feasible, along with prepaid debit cards and digital wallets as alternatives to traditional banking. Specific procedures for all these options will be published in detailed guidance before the 2026 filing season.

Specific procedures for requesting exceptions haven’t been published. The American Bar Association argues that eliminating paper tax refund checks entirely may exceed the Treasury’s legal authority, suggesting that broad exceptions may be necessary to comply with existing refund payment laws.

If unfiled returns might generate refunds, consider your timing carefully. The IRS will provide detailed guidance before the 2026 filing season on electronic alternatives. Contact your tax professional to review filing status and identify returns likely to produce refunds.

For returns showing tax owed, payment by check is still allowed, but will eventually be phased out. Executive Order 14247 specifically states, “As soon as practical, all payments made to the Federal Government shall be processed electronically…”   However, it is generally best to make payments electronically, as they are processed immediately and you receive a confirmation number for your records. If significantly behind on filings, consider IRS Streamlined Filing Compliance Procedures for penalty-free resolution options.

Scammers may exploit confusion about new payment methods, targeting expats with fake communications about “updating payment information” or “activating electronic refunds.” The IRS never initiates contact by phone, email, or text about refund processing changes.

Exercise caution when evaluating prepaid cards and electronic alternatives. When the IRS releases official guidance on their approved prepaid card and digital wallet options, verify all communications through official IRS channels or your registered tax professional to avoid scams.

The policy is intended to be permanent, with the IRS committed to providing electronic alternatives for all taxpayers, including international taxpayers. The IRS will publish detailed guidance before the 2026 filing season to ensure smooth implementation of the new electronic payment options.

Start with your current tax professional, who should know both technical requirements and your specific tax situation. Many expat-focused tax firms proactively help clients address these changes and advise on banking solutions that work in their residence country.

Contact U.S. banks serving expat populations for banking needs, and consult financial advisors who know international compliance requirements. The Federal Deposit Insurance Corporation provides resources on basic banking services that may help identify suitable account options for government payments.

Greenback can help set up direct deposit when preparing your tax return by adding your U.S. bank account information to our tax software.