Significant changes to tax laws under the new One Big Beautiful Bill, set to take effect in 2025, are anticipated to result in substantial refunds for many American taxpayers. According to Treasury Secretary Scott Bessent, the legislative update introduces new deductions for overtime and tipped income, leading to projected refunds totaling between $100 billion and $150 billion this year. Taxpayers could see refunds ranging from $1,000 to $2,000 per household, particularly since many did not adjust their withholding to align with these new provisions.
However, taxpayers need to be aware of a new rule from the IRS that could affect the timing of these refunds. In an effort to streamline the process, the IRS now requires taxpayers to provide their bank account and routing numbers if they wish to receive their refunds via direct deposit. Although it will still accept tax returns filed without this data, refunds will be temporarily held until bank details are submitted or a paper check is requested. Incorrect information could lead to further delays, as the IRS will work to resolve any discrepancies before processing the payment.
Tax experts are emphasizing the importance of being prepared for this shift. Mitchell Gerstein, a senior tax adviser, noted that many individuals are still unfamiliar with the change. For those who are hesitant to share their bank information, it’s crucial to understand that electronic payments are becoming the new norm for the IRS. CPA Jacob Cohen highlighted that opting out of sharing banking information might cause substantial delays of several weeks at a minimum.
Specific groups, including international taxpayers, minors, and some others, will still receive paper check refunds; however, the IRS plans to phase out this option in the near future. As a workaround for those without traditional bank accounts, alternatives such as prepaid debit cards, credit cards, and approved digital wallets are available for direct deposit. Options like NetSpend and Bluebird can provide the necessary routing and account numbers for this purpose.
For individuals considering a fully digital approach, setting up an online IRS account can be beneficial. The ID.me program allows users to track their tax refund status and access documents related to their tax history. The IRS typically processes e-filed refunds within 21 days, while mailed returns may take over six weeks.
The IRS’s push for electronic payments underscores the desire for faster, more secure refunds and a reduction in lost checks, ultimately benefiting both taxpayers and the agency. Tax experts advise setting up an online account with the IRS and ensuring accurate banking details are provided to facilitate timely refunds. By adapting to these changes, taxpayers can navigate the evolving tax landscape efficiently.