The End of Paper Refunds and The Start of The Headaches

The IRS has drawn a line in the sand.

Starting in January 2026, refunds won’t arrive in your clients' mailbox. They’ll arrive electronically—but also potentially not at all if clients miss critical steps.

The IRS has made it official - paper refund checks are done.

Denise Davis, Director at the IRS Taxpayer Services Division, just laid out the roadmap. Starting with the 2025 tax year, refunds will begin moving exclusively to electronic methods. By January 2026, paper checks could be a relic.

On paper (no pun intended), this is about modernization. But for professionals who guide clients through tax matters—especially those already under IRS scrutiny—this transition has the potential to cause major problems.

Why This Matters

Tax refunds aren’t just a “nice surprise” for people. For many, they’re rent money, payroll money, survival money. Delay that refund by six weeks because of missing banking info, and your client is freaking out. For small businesses, it could mean cash-flow chaos.

And who do they lean on in that moment? Not the IRS call center. Not the chatbot.

You.

Four Things You Need to Know

1. The Timeline Is Tighter Than You Think

January 2026 is the official launch date for mandatory electronic refunds, but the testing phase starts earlier. Extension filers in October 2025 may already be guinea pigs. If your clients file late, they may be the ones learning the hard way.

2. Businesses Are Way Behind

Only 4% of businesses currently use direct deposit for refunds. Compared to 91.5% of individuals. That means the vast majority of businesses are still expecting paper. When the IRS updates tax forms to capture banking details in 2026, expect confusion, errors, and plenty of hand-holding required.

3. Not Everyone Fits the Mold

What about clients abroad? Trustees handling estates? Clients in bankruptcy? Those filing amended returns? The IRS has said it will “expand options” for these groups by 2027, but until then, these clients are in for extra hoops and possible delays.

4. IRS Flexibility Is a Moving Target

Even after rollout, the IRS admits it may tweak processes in summer 2026 based on early feedback. Translation: what you advise a client in spring might not hold true by July, i.e., further confusion. Staying nimble will be key but it will be super annoying.

TL;DR (Too Long; Didn’t Read)

⏩ Paper refunds are disappearing starting January 2026.

⏩ Small businesses are most at risk—they rarely use direct deposit.

⏩ Special groups (international, bankruptcy, amended returns) face more delays until at least 2027.

⏩ Mid-year IRS changes could make guidance a moving target.

⏩ Professionals like you will be the ones fielding calls when refunds stall.

➥ Contact Attorney Stephen A. Weisberg for a free Tax Debt Analysis.

Contact Me Here: https://www.weisberg.tax/contact-1

Email: sweisberg@wtaxattorney.com

Phone/Text: (248) 971-0885

Address: 300 Galleria Officentre, Suite 402, Southfield, MI 48034