IRS Mandated to Digitize Refunds as Paper Checks Are Phased Out

By Kim Esmores & Tina Azarvand, Esq., LL.M.

A sweeping federal mandate has brought the era of paper tax refund checks to a close, and Marianas taxpayers need to act now. Beginning with returns filed in 2026 for the 2025 tax year, the IRS is moving away from issuing tax refunds via paper check.

Last year, President Trump signed Executive Order 14247, titled "Modernizing Payments To and From America’s Bank Account," directing the U.S. Department of the Treasury and the IRS to transition all federal payments, including tax refunds, to electronic payments. This mandate applies to U.S. taxpayers everywhere, including throughout the Marianas.

Many taxpayers across the Marianas are no strangers to IRS obligations. Employers throughout Guam and the CNMI are required to file Form 941, the Employer’s Quarterly Federal Tax Return, to report and remit Social Security and Medicare taxes on employee wages. Self-employed individuals in the islands file Form 1040-SS with the IRS to report self-employment income and calculate their self-employment tax. Additional federal filing requirements may apply depending on individual circumstances. For those with these IRS obligations, the new electronic payment mandate directly affects how refunds are received and how federal payments are made.

The IRS has justified this transition on safety and efficiency grounds, as electronic payments are reportedly over 16 times less likely to be lost, stolen, altered, or delayed compared to paper checks. For Marianas taxpayers, who are already familiar with the chronic delays and mail delivery issues that come with being thousands of miles from the mainland, this shift offers a meaningful and long-overdue improvement.

The method for submitting your tax return has not changed. What has changed is how the IRS issues your refund and, in time, how it expects to receive your payments. For all returns covering the 2025 tax year and onward, taxpayers must now include their direct deposit banking information. This requirement does not apply to returns covering the 2024 tax year or earlier, though the IRS strongly encourages anyone filing prior-year returns under extension to include direct deposit details as well.

For residents without a traditional bank account, the IRS has identified several alternatives, including prepaid debit cards and digital wallets. If electronic payment is truly not an option, you can request an exception. The IRS will send a CP53E notice asking for your banking details or a written explanation, after which a paper check may be issued under a hardship exception.

The speed advantage of direct deposit is significant. The IRS typically delivers refunds via direct deposit in under 21 days. For island residents accustomed to waiting six weeks or more for a paper check to arrive by mail, this is a meaningful improvement.

It is important to note that the IRS still accepts checks and money orders for taxes owed, but still strongly encourages taxpayers to pay electronically through IRS Direct Pay (using a bank account), debit or credit card, digital wallet, or the IRS2Go mobile app.

Executive Order 14247 covers both payments from and payments to the federal government. While mandatory electronic payments to the IRS are not expected to be required until sometime after 2026, taxpayers are advised to begin making the transition now rather than waiting.

The days of waiting for an IRS refund check in the mail are ending for Marianas residents, and on balance, that is good news. Direct deposit means faster refunds, fewer lost payments, and stronger security.

If you have delinquent returns or outstanding balances with the IRS, our team is available to help you get into compliance. Email info@azarvandtaxlaw.com for a complimentary 30-minute consultation. For more on the electronic payment transition, the IRS has published a Fact Sheet available here.