IRS faces obstacles on electronic payments

The Internal Revenue Service is making progress on its efforts to move all taxpayers toward electronic payments, but still faces barriers, according to a new report.

The report, released Thursday by the Treasury Inspector General for Tax Administration, noted that in March 2025, President Trump signed an executive order requiring federal payments and receipts to be made electronically, with certain exceptions for individuals who might face undue hardship. Before the executive order was implemented, most individuals and businesses were already making tax payments or receiving refunds from the IRS electronically. In 2024 and 2025, 654 million of 743 million tax transactions (88%) were electronic. Specifically, 81% of individual payments and 85% of individual refunds were electronic. While nearly all (97%) of business payments were electronic, only 0.7% of business refunds were electronic. However, business refunds (approximately 5 million) were less than 1% of the 743 million total tax transactions. 

TIGTA found the IRS is making progress helping more individual and business taxpayers make electronic transactions. The IRS redesigned several of its business tax forms to allow taxpayers to input their bank account information and updated notices and online services to help individual taxpayers understand the executive order and how to comply.

"Replacing paper checks with electronic transfer will increase efficiency, reduce the risk of fraud, and provide significant cost and time savings to the IRS," said the report. "These changes are intended to help deliver refunds faster and improve the experience for most taxpayers."

Nevertheless, the IRS still has to overcome several challenges in order to increase the number of taxpayers who send or receive electronic tax transactions. Some of the challenges were acknowledged in the executive order and include taxpayers who are unbanked, hold certain religious beliefs, or have limited access to technology. 

"For example, certain Amish and Mennonite taxpayers do not use electronic financial transactions," said the report. "The IRS plans to review this exception category after the 2026 Filing Season to evaluate how many people are affected and consider any legal and ethical challenges that might arise from requiring electronic transactions."

In addition, the IRS needs to further increase public awareness, modify more of its tax forms to allow taxpayers to include bank account information, notify affected business taxpayers, and update tax account features for businesses so they can provide banking information.

This year, the changes also led to extensive delays for taxpayers who did not have bank accounts where their tax refunds could be deposited by the IRS, prompting the IRS to send out over 1 million notices to taxpayers.

The report made no recommendations and didn't include a response from any IRS officials.