The IRS is making significant changes in how tax refunds will be processed starting in 2026, moving away from traditional paper checks in a bid to modernize payment methods. Taxpayers who typically receive their tax refunds by paper check may find themselves in a state of confusion regarding how to navigate these changes during the upcoming filing seasons.
Under the new rules, refunds for tax returns filed in 2025 will be impacted if taxpayers do not provide direct deposit information, or if the direct deposit is rejected. The IRS will continue to process individual income tax returns without direct deposit details, but any refunds will be temporarily frozen until the taxpayer updates their bank information or requests a paper check.
Rejected direct deposits will not be automatically reissued as paper checks; taxpayers must take initiative in these situations. Certain groups, including international taxpayers, minors, prisoners, and those with religious exceptions, are excluded from these new rules, streamlining the process for many.
In the event a taxpayer’s refund is frozen, they will receive a CP53E notice explaining the next steps. It’s crucial for taxpayers to respond promptly within 30 days to prevent further delays. If no action is taken, the IRS will take up to six weeks before issuing a paper check. Importantly, if a direct deposit is rejected a second time, taxpayers will not receive another opportunity to update their banking details.
To update their direct deposit information, taxpayers can use their IRS Online Account to enter new or corrected details. If the IRS verifies this information, the refund will be issued electronically. Those without a direct deposit option can request a waiver for a paper check. For any clarification, the CP53E notice provides a toll-free informational line, though it does not connect users to live support.
To prevent delays in receiving refunds, taxpayers are encouraged to double-check their bank routing and account numbers before filing, utilize direct deposit whenever possible, and set up or access their IRS Online Account promptly. These proactive measures can help ensure a smoother transition to the updated refund processing system.
For more information about these changes, taxpayers can visit the IRS website dedicated to modernizing payments. By embracing these new rules, the IRS aims to create a more efficient system for refund distribution, ultimately benefiting taxpayers in the years to come.