From Refunds to Payments: The Next Phase of IRS Modernization

The federal government is continuing its effort to modernize how money moves through what has been called “America’s bank account,” said the U.S. Treasury. Recent policy actions encouraging agencies to expand electronic payment capabilities reflect a broader effort to improve the speed, security, and efficiency of government transactions.

Previously, we outlined the discontinuation of paper tax refund checks and other federal disbursements, one part of a larger initiative to modernize federal payment infrastructure.

Attention is turning to the other side of the equation: payments made to the federal government, including taxes paid to the IRS.

While policymakers are encouraging expanded electronic payment capabilities, paper payments to the IRS are still permitted today. Taxpayers may continue using checks or money orders, and there is no immediate mandate requiring a change. However, ongoing modernization efforts suggest taxpayers may want to monitor future developments.

The push to modernize federal payments

Federal agencies have been working to modernize payment systems to improve efficiency, reduce administrative costs, and strengthen security.

Paper checks remain in use for many applications, but present operational challenges. They require manual processing, can be delayed in transit, and carry higher risks of fraud, loss, or theft compared with digital transactions.

Electronic payments typically process faster, provide clearer records, and reduce the administrative burden of handling physical payments. As a result, agencies continue evaluating opportunities to expand digital payment options where practical.

How taxpayers currently pay the IRS

It is important to note that paper payments remain an accepted way to pay federal taxes. Taxpayers can still mail checks or money orders to the IRS along with tax returns or payment vouchers.

At the same time, the IRS has expanded several electronic payment tools that many taxpayers already use today, including:

• IRS Direct Pay, which allows payments directly from a bank account
• Electronic Federal Tax Payment System (EFTPS)
• Electronic funds withdrawal during electronic filing
• Debit or credit card payments through authorized payment processors

For many businesses and individuals, these digital tools are already the most common way to submit tax payments.

Why businesses and individuals may want to review their payment processes

Taxpayers do not need to change how they pay their taxes if their current process works well. Paper payments remain valid, and any future changes would likely involve additional guidance and transition time.

However, the modernization effort presents an opportunity to review how tax payments are managed. Organizations that rely on manual processes may benefit from evaluating whether electronic platforms could improve efficiency, internal controls, or payment tracking.

Many companies already use systems such as EFTPS to schedule payments, maintain documentation, and streamline reconciliation.

What this means moving forward

For now, taxpayers still have flexibility in how they pay the IRS, including paper checks if they prefer.

At the same time, federal efforts to modernize payment systems suggest electronic options will likely continue to expand. Staying familiar with available digital payment tools today can help taxpayers remain prepared as federal payment systems evolve.

As the federal government modernizes payment systems, businesses may want to assess how their tax and financial processes support efficiency, accuracy, and security. Fill out the form to connect with a UHY tax advisor who can review your current approach and identify opportunities for improvement.

Evaluate My Tax Strategy