IRS phaseout of paper checks delays tax refunds for 1.4 million people

More filers are facing delays in receiving their tax refunds as paper checks are phased out across the government.

Democrats on the House Ways and Means Committee sent another letter to Treasury Secretary Scott Bessent this week expressing “further concerns” about the roughly 1.4 million IRS notices sent to filers about refund delays related to paper payment requests. As of the lawmakers’ first letter, dated March 9, more than 830,000 taxpayers said they had received such notices.

The IRS notice, known as CP53E, asks taxpayers for up-to-date banking information to receive refunds by direct deposit. Recipients must provide these details within 30 days through their IRS online account. If you do not, the IRS will issue you a written refund after six weeks.

“This issue is urgent, as individuals and families facing delays need tax refunds to offset the high costs of gas, food, and essential goods,” the lawmakers wrote.

The changes to reimbursement payments stem from an executive order signed by President Donald Trump in March 2025 that requires government agencies to transition from paper payments to electronic payments.

In September, the IRS announced a shift to paper payments to protect taxpayers, speed refunds and reduce costs.

The Treasury Department did not respond to CNBC’s request for comment on the letter from Democratic members of the House Ways and Means Committee.

Many Americans are receiving larger tax refunds this season thanks to changes enacted by President Donald Trump’s “Big and Beautiful Bill.”

The average refund for individual filers as of March 13 was $3,623, up about $350 from a year ago, according to the latest IRS data.

Some economists say this windfall could be offset by higher fuel prices during the Iran war, depending on how long the conflict lasts. Gasoline prices nationally averaged $3.97 per gallon on Friday, an increase of about 33% from a month ago, according to AAA.

The Trump administration is focusing on the size of tax refunds as many Americans struggle with rising costs of fuel, food, housing and other living costs. Affordability has become a key issue for both parties as the November midterm elections approach.

According to the National Taxpayer Advocate, during the 2025 filing season, approximately 94% of individual taxpayers chose to receive their refund by direct deposit by providing bank account details on their tax return. The remaining filers, about 10 million taxpayers, received their refunds in paper checks.

The IRS’ move from paper checks to electronic payments is impacting “a wide range of people,” Omeed Firouzi, a professor of practice at Temple University’s Beasley School of Law and director of the Low-Income Taxpayer Clinic, told CNBC.

Firouzi, who submitted comments to the Treasury Department through the American Bar Association ahead of the change, said the policy could have a greater impact on “unbanked” taxpayers, the elderly, unhoused individuals or younger filers who move more frequently.

If you receive a CP53E notice, you must provide your bank account details via your IRS online account within 30 days. If you do not, the IRS will issue you a written refund after six weeks. However, some filers may not have easy access to Wi-Fi or a computer.

Firouzi said he supports the rationale for phasing out paper checks, but said their introduction “adds even more red tape and burden that seems counterintuitive.”

Elaine Maag, a senior fellow at the Urban-Brookings Tax Policy Center, told CNBC she agrees with the Treasury Department that paper refunds are “problematic” for a variety of reasons.

She said paper checks are error-prone and don’t always reach the right person, and officials prefer safer payment methods.

But “when you act quickly and implement policies without prior notice, it’s very difficult for people to react,” Maag said.

Ultimately, delays in tax refunds could cause “financial hardship” for some filers, such as delaying important purchases or medical care or switching to more expensive financial services, he said.