Paper Checks Phase Out: What US Businesses Need to Know

The federal paper checks phase out began on September 30, 2025. Under Executive Order 14247, the US Treasury stopped issuing paper checks for most federal payments, including vendor payments, benefits and tax refunds, with limited exceptions. Businesses paid by federal agencies should receive electronic payments, and payments to the government are moving online too.

If you sell to a federal agency, receive tax refunds, or pay federal taxes and fees, this change affects how money moves in and out of your business. This guide explains what the executive order says, what has happened since, what businesses on both sides of federal payments should do, and the best alternatives to checks for your own customers and suppliers. It reflects official IRS, Treasury and Federal Register sources at the time of writing. Rules are still being finalized, so check official guidance or a qualified adviser for your situation.

The paper checks phase out: what Executive Order 14247 says

Executive Order 14247, "Modernizing Payments To and From America's Bank Account", was signed on March 25, 2025. Its key provisions:

• Federal disbursements. Effective September 30, 2025, and to the extent permitted by law, the Treasury Secretary must stop issuing paper checks for federal disbursements, including intragovernmental payments, benefits, vendor payments and tax refunds.
• Payments to the government. As soon as practicable, and to the extent permitted by law, all payments made to the federal government should be processed electronically.
• Agency transition. Agencies must move to electronic funds transfer methods such as direct deposit, debit and credit cards, digital wallets and real-time payments, and enroll recipients.
• Exceptions. Treasury must maintain limited exceptions, including for people without access to banking or electronic payments, certain emergency payments, and national security or law enforcement activities.
• Public awareness. Treasury must run a campaign to help recipients set up electronic payment options.

The phrase "to the extent permitted by law" matters. The paper checks phase out is a strong default, not an absolute ban, and some checks are still issued where an exception applies.

What has happened since September 30, 2025

Date	Development
March 25, 2025	Executive Order 14247 signed.
September 30, 2025	Effective date for Treasury to stop issuing paper checks for federal disbursements, to the extent permitted by law.
Fall 2025	IRS began phasing out paper refund checks and expanding electronic payment guidance.
January 2026	IRS published questions and answers on the order, confirming checks and money orders are still accepted for now.
April 29, 2026	Treasury's Bureau of the Fiscal Service proposed changes to 31 CFR part 208, tightening when agencies may still issue paper checks. Comments closed June 15, 2026.

Treasury's April 2026 proposal gives useful context. It says about 97% of the more than 1.3 billion payments Treasury disburses each year are already electronic, yet Treasury still printed about 40.9 million checks in fiscal year 2025. It says checks are roughly 16 times more likely than electronic payments to be lost, stolen, returned or altered, and cost an average of $3.07 each to issue, about 20 times an ACH payment. At the time of writing we could not find a final version of that rule, so check the Federal Register for updates.

What the proposed rule would change

• Agencies could issue paper checks without Treasury approval only in specific cases, such as certain foreign payments, the first 120 days in declared disaster areas, contingency operations, national security or law enforcement, and some areas without electronic payment infrastructure.
• Other checks, including non-recurring payments to individuals and small businesses, would need Treasury approval.
• Paying agencies, not Treasury, would review individual hardship waiver requests.

For small businesses that occasionally get a one-off payment from a federal agency, the message is clear: expect to be paid electronically and have your bank details ready.

What about people without bank accounts?

The order recognizes that some recipients, mostly individuals rather than businesses, do not have a bank account. For them, Treasury already offers sponsored options such as the Direct Express prepaid card for federal benefits, and the proposal allows prepaid accounts and digital wallets that meet Treasury's rules for receiving federal payments. The IRS has also said it will point unbanked taxpayers to options such as certain prepaid debit cards and mobile apps that accept direct deposit. If you are a sole proprietor who mixes personal and business money, this is a good moment to open a separate business bank account, which makes electronic payments, bookkeeping and tax time far simpler.

If a federal agency pays your business

Federal contractors and vendors were already generally paid by electronic funds transfer under federal acquisition rules, using the bank details in their SAM.gov registration. The paper checks phase out closes remaining gaps. To avoid delays:

1. Keep SAM.gov current. Check your registration is active and your banking details are correct. Renew it before it expires.
2. Match names exactly. The account name should match your registered legal business name to avoid rejected payments.
3. Include clear references on invoices. Use the contract or purchase order number and your invoice number, so the agency can match payment. Our guide to the PO number on an invoice explains why it matters.
4. Watch remittance details. Electronic payments arrive with payment information. Match each deposit to the invoice it pays. See our explainer on remittance advice.
5. Update grant and reimbursement accounts. If you receive grants or one-off reimbursements, register bank details with the paying agency.
6. Be alert to fraud. Criminals target vendors with fake requests to change bank details. Verify any change through a known contact.

Worked example: a small federal subcontract

A two-person IT consultancy completes a $14,500 task for a federal agency. In the past, a one-off payment like this might occasionally have arrived by check. Now the consultancy sends its invoice with the contract number, PO number and invoice number, and confirms its SAM.gov bank details are current. Payment arrives by ACH, typically with remittance information, and the consultancy records it against the invoice the same day. No check deposit, no mail delays and no risk of a stolen check.

If your business pays the federal government

The order says payments to the government should go electronic as soon as practicable, but at the time of writing the IRS still accepts checks and money orders while it phases in changes. Practical steps:

• Federal tax deposits. These must already be made electronically, through EFTPS, IRS Direct Pay for businesses or your IRS business tax account. Card and cash payments are not accepted for federal tax deposits.
• Other tax payments. Use IRS Direct Pay, your business tax account, EFTPS, or card and digital wallet options through approved processors (which charge fees).
• Fees and other federal payments. Many agencies accept payment online through Pay.gov.
• Third parties. The IRS expects payroll providers and others paying on clients' behalf to use electronic methods available to them.
• Refunds. Give bank details on returns so refunds can arrive by direct deposit. The IRS has said that if you do not, it may contact you and hold the refund until you respond.

Alternatives to paper checks

Whether you deal with federal agencies or not, the paper checks phase out is a good moment to review how you pay and get paid. The main options in the US:

Method	Typical cost	Speed	Best for
ACH transfer	Low or free	Same day to a few business days	Regular supplier and customer payments
Wire transfer	Higher fixed fees	Usually same day	Large or urgent payments
Instant payments (RTP, FedNow)	Varies by bank	Seconds, 24/7	Urgent payments where both banks support it
Card payments	Processing fees per transaction	Settles in days	Customer convenience
Payment apps and digital wallets	Varies; business fees often apply	Fast	Small payments and consumers

For a deeper comparison, read ACH vs wire transfer and FedNow vs RTP instant payments. If you want to take cards, our guide on how to accept credit card payments covers setup and fees.

Paper checks phase out readiness checklist

Use this list to make sure the change does not interrupt your cash flow:

1. List every federal payment your business receives: contract payments, grants, tax refunds, reimbursements.
2. Confirm each paying agency has your current bank details, and that SAM.gov is active if you are a contractor.
3. List every federal payment you make: tax deposits, estimated taxes, filing and license fees.
4. Set up the right online channel for each: EFTPS or your IRS business tax account for taxes, Pay.gov or the agency's own portal for fees.
5. Include bank account details on tax returns so refunds can be paid by direct deposit.
6. Agree a written process for changing bank details, with call-back verification to a known number.
7. Tell your bookkeeper or accountant, so electronic deposits are matched to the right invoices.

Fraud risks during the transition

Every big change in how payments work creates openings for criminals. Expect messages that look like they come from Treasury, the IRS or a contracting agency, asking you to "update your payment details" because checks are ending. Treat any such request with suspicion. Log in to the official portal directly rather than clicking a link, and never give bank details or login codes in response to an unsolicited call, text or email.

The same applies in reverse: if a supplier suddenly asks you to send payments to a new account, verify the change by calling a number you already have on file. Our guide to invoice scams covers the most common tricks, including fake bank detail change requests.

Should your business stop accepting checks?

The executive order does not affect private payments. You can still accept checks from customers. But there are good reasons to steer customers toward electronic payments:

• Fraud. Check fraud, including stolen and altered checks, remains a serious problem.
• Speed. Electronic payments reach your account faster, which improves cash flow.
• Admin. Fewer bank trips, fewer deposit errors, easier reconciliation.

The simplest step is to put your bank transfer details on every invoice and make electronic payment the default option. Our guide to bank details on an invoice shows what to include, and how to get paid faster has more ideas.

Worked example: moving customers off checks

A landscaping company bills 60 clients a month and half pay by check. Each check takes time to record and deposit, and payments arrive about a week after the invoice. The owner adds ACH details and a payment link to every invoice, with the note "Bank transfer preferred". Within three months, most check payers have switched, payments arrive several days sooner on average, and the owner stops making weekly bank runs.

Conclusion

The federal paper checks phase out is well underway. Treasury stopped issuing most federal checks from September 30, 2025, tighter rules on exceptions have been proposed, and payments to the government are moving online. If federal agencies pay you, keep your SAM.gov and bank details current and put clear references on your invoices. If you pay the government, use electronic options now. Then make electronic payment easy for your own customers too: create an invoice with your bank details in our free US invoice generator and browse more payments guides.