As a CPA specializing in tax, this Executive Order concerning the modernization of payments to and from the U.S. Federal Government has several implications for tax practitioners and our clients. This summary highlights the key aspects relevant to our practice.

Effective Date and General Mandate:

The Executive Order, issued on March 25, 2025, mandates a significant shift away from paper-based payments by the Federal Government. Effective September 30, 2025, the Secretary of the Treasury is directed to cease issuing paper checks for all Federal disbursements, including tax refunds. Similarly, the order states that all payments made to the Federal Government, including taxes, shall be processed electronically as soon as practicable and to the extent permitted by law. This transition aims to reduce costs, delays, and the risks of fraud associated with paper checks. The reliance on paper checks has historically led to a higher incidence of loss, theft, undeliverability, or alteration compared to electronic funds transfers (EFTs).

Exceptions to the Paper Check Phase-Out:

While the order strongly pushes for electronic transactions, it acknowledges that certain exceptions are necessary. The Secretary of the Treasury is tasked with reviewing and revising procedures for granting limited exceptions where electronic payment and collection methods are not feasible. These exceptions include situations for:

Individuals without access to banking services or electronic payment options [7(i)]. This is a crucial consideration for practitioners who represent clients who are unbanked or underbanked. Alternative payment options will need to be provided for these individuals.
Certain emergency payments where electronic disbursement would cause undue hardship [7(ii)]. While less directly related to routine tax matters, this could potentially affect disaster relief payments with tax implications.
National security- or law enforcement-related activities where non-EFT transactions are necessary or desirable [7(iii)]. This is unlikely to directly impact the majority of tax practices.
Other circumstances as determined by the Secretary of the Treasury [7(iv)]. This broad category leaves room for future regulatory guidance that may be relevant to specific taxpayer situations.

Transition to Electronic Payment Methods:

The Executive Order explicitly mentions various electronic payment methods that will be utilized, both for disbursements and receipts. These include:

Direct deposit [4, 6(i)]. This will likely become the primary method for receiving tax refunds.
Prepaid card accounts and other digital payment options. Taxpayers may have the option to receive refunds via these methods.
Debit and credit card payments [6(ii)]. This is already a common method for taxpayers to remit tax payments and is expected to continue and potentially expand.
Digital wallets and real-time payment systems [6(iii)]. The order anticipates the use of these modern payment technologies for federal transactions, including tax payments and potentially some types of refunds in the future.

The Secretary of the Treasury will support agencies in this transition by providing access to these centralized payment systems.

Impact on Federal Receipts (Including Taxes):

The order mandates that all payments to the Federal Government, including fees, fines, loans, and taxes, should be processed electronically as soon as practicable. The Secretary of the State, the Secretary of the Treasury, the Secretary of Health and Human Services, the Secretary of Education, the Secretary of Veterans Affairs, and the Secretary of Homeland Security are directed to eliminate the need for the Department of the Treasury’s physical lockbox services and expedite the receipt of federal payments through electronic means. This implies a continued and potentially accelerated push towards electronic filing and payment systems for all types of federal taxes.

Public Awareness and Support:

The Secretary of the Treasury, in coordination with other agencies, will develop and implement a public awareness campaign to inform recipients of the transition to electronic payments and provide guidance on accessing and setting up digital payment options. Agencies will also coordinate with the Treasury to ensure a smooth transition and provide adequate support to affected individuals and entities. The Secretary of the Treasury will also work with financial institutions, consumer groups, and other stakeholders to address financial access for unbanked and underbanked populations. This suggests that efforts will be made to ensure that all taxpayers can comply with the shift to electronic payments.

Data Security:

The order emphasizes the importance of protecting classified information and systems, as well as personally identifiable information and tax return information, during the implementation of this transition. This is a critical aspect for CPAs and our clients, and we can expect continued focus on secure electronic payment and data transmission methods.

Compliance Plans and Reporting:

Heads of agencies are required to submit a compliance plan within 90 days of the order (by June 23, 2025) detailing their strategy for eliminating paper-based transactions. The Secretary of the Treasury will also submit an implementation report within 180 days of the order (by September 21, 2025) outlining the progress made. These reports will provide further insight into the specific timelines and procedures for the transition.

Conclusion:

This Executive Order signifies a significant shift in how the Federal Government processes payments, both incoming and outgoing, with a clear mandate to move towards electronic methods by September 30, 2025. For tax practitioners, this means preparing our clients for the near-complete elimination of paper checks for federal tax refunds and ensuring they have access to and understand electronic payment options for remitting taxes. While exceptions will exist, it is crucial for us to stay informed about the specific procedures and alternative payment methods that will be available for those who qualify. The emphasis on electronic transactions also underscores the ongoing importance of data security and the need to guide our clients in utilizing secure digital payment methods. We should anticipate further guidance from the Treasury and relevant agencies as the implementation progresses.

Prepared with the assistance of NotebookLM

The Executive Order can be read via the link below:

“Modernizing Payments To and From America’s Bank Account” Executive Order