With the IRS’ shift to electronic tax refunds this filing season, two House Democrats cautioned that over 830,000 taxpayers are already being notified their refund will be delayed.
Representatives Danny Davis (D-IL) and Terri Sewell (D-AL) – who are both members of the House’s taxwriting committee – say that taxpayers who seek a paper check refund may need to wait for more than 10 weeks for that refund this year. The reason, they explain in a March 9 letter to Acting IRS Commissioner Scott Bessent, is a 2025 executive order mandating a transition to electronic payments for all federal disbursements.
Paperless Transition Plan
The IRS has shared its procedures when taxpayers do not provide direct deposit information with their return. These taxpayers will receive a “CP53E notice” requesting that they add or update bank account information within 30 days. Updates can only be made via a taxpayer’s online account – IRS employees cannot update the information of taxpayers who call the toll-free line.
Taxpayers who do not respond to the notice will be issued a paper check after six weeks, per the IRS. In addition, if bank account information is entered with errors and direct deposit is rejected by a bank, the IRS will issue a paper check.
Paper Check Reliance Persists for Certain Groups
Davis and Sewell, however, contend that many taxpayers rely on paper checks. “Having reviewed the IRS notice and called the IRS phone lines, we learned that there is no simple process for these taxpayers to request an immediate release of their refund by paper check without waiting at least 10 weeks,” write the lawmakers.
The National Taxpayer Advocate explains that there are multiple categories of taxpayers who rely on paper checks. Unbanked households that lack a checking or savings account constituted 4.2% of U.S. households – 5.6 million total households – as of 2023, per a Federal Deposit Insurance Corporation survey.
In addition, electronic payments may pose a challenge for U.S. citizens who reside abroad. “Many foreign banks cannot accept or process IRS transactions, and the IRS does not routinely offer international electronic transfers,” says the NTA.
The NTA also warns that victims of domestic violence may be wary of sharing banking information “due to safety, control, or privacy concerns.” And individuals with disabilities may face challenges in using electronic banking systems, while taxpayers in certain religious groups may avoid electronic systems based on their religious beliefs,
“The government does not appreciate how difficult it is for some populations to open a bank account or how much they depend on timely refunds,” said Kostelanetz Partner Melissa Wiley.
And those taxpayers may be the ones who most rely on the cash flow their refunds provide, she explained. “This policy is harmful in many ways, as we saw play out when we were serving low-income taxpayers in Alaska,” Wiley told Checkpoint. “Most of those taxpayers receive refunds, which get them through the leaner months in the late winter. This year, we had to tell them that they weren’t going to get those refunds for many months unless they could come up with a bank account.”
Interest on Delayed Refunds
Davis and Sewell push Bessent for details on how taxpayers seeking a paper check refund can expedite the process. Specifically, they ask whether the IRS is providing an alternative request mechanism for taxpayers who do not have an IRS online account.
Another question the lawmakers have is whether taxpayers with delayed refunds will be receiving interest.
Wiley explained that the IRS has 45 days from April 15th to process refunds. Paper check refunds that are delayed by up to 10 weeks “will result in significant interest payments to taxpayers who were left waiting for their refunds for excessive periods of time,” she added.
“Not only do I think it is bad policy given the multitude of reasons that people cannot have their refund direct deposited, I expect this will also end up costing the government more in interest they will owe than it will have been worth,” said Wiley.
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