On March 25, 2025, President Trump signed an executive order directing the U.S. Department of the Treasury to phase out paper check disbursements by September 30, 2025, and to expedite efforts to make all federal payments and receipts digital.1
WHY THIS MATTERS
This development may be significant for employers who currently rely on checks or money orders for tax-equalization processes, including receiving refund checks and making tax payments on the assignees’ behalf. The government's shift to digital payments will likely require companies with global mobility programs to change their procedures, especially concerning the receipt of refunds and tax payments.
Background
The executive order mandates the Department of the Treasury to cease issuing paper checks for disbursements from the federal government, such as tax refunds, by September 30, 2025. Additionally, the order mandates that all payments made to the federal government, such as tax payments, be processed electronically “as soon as practicable, and to the extent permitted by law.” The executive order aims to transition all federal disbursements and receipts to digital formats, with certain exemptions. Exemptions are provided for individuals lacking banking access, emergency situations, and specific national security and law enforcement activities.
The Secretary of the Treasury – currently Scott Bessent – is tasked with delivering an implementation plan within 180 days. This move aligns with recent legislative initiatives by the House Ways and Means Committee, which include measures to facilitate electronic tax payments and refunds.
KPMG INSIGHTS
The digitization of the government’s disbursements and receipts will have broader implications that employers will need to consider. The Internal Revenue Service (IRS) generally limits the number of direct deposits into a single financial account per year to combat fraud and identity theft.2 This may present significant challenges for employers who are currently receiving refunds on their employees’ behalf, necessitating alternative arrangements. As a result, refunds would have to be deposited into the employees’ financial accounts and then repaid to the employer. This would present a challenge for foreign nationals who will be required to maintain a U.S. bank account after leaving the United States because the IRS does not allow a direct deposit of a refund into a foreign bank account. On the other hand, companies may face an increased collection risk where refunds are first received by the employee. This may require enhanced tracking and year-end reconciliation efforts to reduce potential refunds and mitigate potential collection risks
Additionally, if employers lose the ability to make tax payments on the assignee’s behalf, foreign nationals without a U.S. bank account may be required to use alternatives such as international wire transfers, debit cards, credit cards, or digital wallets.3 However, all of these payment methods generally incur additional fees.
FOOTNOTES:
1 The White House, "Fact Sheet: President Donald J. Trump Modernizes Payments to and from America’s Bank Account" (March 25, 2025).
Also see, TaxNotes, “Executive Order on Phasing Out Paper Check Payments" (March 25, 2025). This article can be accessed at this link (please note, log-in credentials may apply): https://www.taxnotes.com/tax-notes-today-federal/tax-system-administration/trump-executive-order-phase-out-paper-check-payments/2025/03/26/7rt6s . Please note that by clicking on this link, you are leaving the KPMG website for an external (non-KPMG, non-governmental) site, that KPMG is not affiliated with nor does KPMG endorse its content. The use of the external site and its content may be subject to the terms of use and/or privacy policies of its owner or operator.
2 See the IRS “Refunds” website (Topic No. 152, Refund Information) and the “Direct deposit limits” webpage.
3 See the IRS “Make a payment” website.
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Disclaimer
The above information is not intended to be "written advice concerning one or more Federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230 as the content of this document is issued for general informational purposes only.
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