Why the IRS and Social Security Still Mail Paper Checks

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In fiscal year 2025, the IRS issued 116.9 million refunds to individuals, and millions still landed in mailboxes as paper checks. Under federal law, though, paying you by paper check is not the default. It hasn’t been the default for more than twenty years.

Since 1999, a federal statute has said, in effect, that almost all government payments must go out electronically. And yet the check keeps coming. It lands in mailboxes for a slice of Social Security recipients, for millions of tax refunds, and, in the form of letters, for nearly everyone who has ever tangled with the IRS.

So the real question isn’t why the government is slow to modernize. It’s why the law that already commands electronic payment still leaves so much paper in the system.

The short answer has three parts. Congress carved tax refunds out of the electronic mandate on purpose. The rules that cover everything else come with hardship waivers for people who can’t use a bank. And a whole category of government mail, the legal notices that start deadlines and give you rights, has almost nothing to do with how you get paid.

The electronic mandate, and the sentence that exempts your tax refund

The governing law is 31 U.S.C. § 3332, which was amended by the Debt Collection Improvement Act of 1996. Its language is blunt. It says “all Federal wage, salary, and retirement payments shall be paid to recipients of such payments by electronic funds transfer,” unless Treasury decides another method is appropriate.

The EFT mandate is just one piece of that same 1996 act. The law was primarily aimed at maximizing collection of delinquent federal debts by putting enforcement in one place, at the Treasury Department.

Congress didn’t stop at paychecks and pensions. It layered the mandate in phases. New wage and retirement recipients came in first, then a broader class of recipients within 90 days of the 1996 act, and finally a sweeping rule that all federal payments made after January 1, 1999 must move by electronic funds transfer.

The statute defines that term broadly. It covers Automated Clearing House transfers and Fedwire (electronic bank-to-bank transfer systems), ATM transactions, and point-of-sale terminals (card readers at checkout). Anything that isn’t cash or paper.

On the page, this looks like it should have killed the mailed check outright.

Then you reach the definitions, where the whole thing turns on a single sentence. Congress spelled out what counts as a “Federal payments” listing wages, vendor payments, and benefit payments. And then it added: “Such term shall not include any payment under the Internal Revenue Code of 1986.”

That is the sentence. Tax refunds are payments under the Internal Revenue Code, so they sit outside the mandate entirely.

This is a different kind of exception from the ones that come later. It isn’t a hardship accommodation for someone without a bank. It removes an entire category of payments from the rulebook. The IRS was never told it must pay you electronically, which is exactly why it can still mail you a check without asking anyone’s permission.

Treasury’s own regulations repeat the line so no one misses it. The opening of 31 C.F.R. Part 208 explains that the part “requires payments, other than payments made under the Internal Revenue Code of 1986, to be made by electronic funds transfer.”

So we already have two of our three answers. Social Security is inside the mandate. Your tax refund was deliberately left out.

How Social Security became nearly all-electronic

Because retirement and benefit payments fall squarely inside § 3332, the Social Security Administration has pushed about as far toward all-electronic delivery as the law allows.

The agency now offers two standard ways to be paid: direct deposit into a bank or credit union account, or deposit onto a Direct Express prepaid debit card. That second option exists precisely for people without bank accounts. There’s no credit check, no minimum balance, and no account required to sign up. Funds land on payment day, and the card works for purchases, ATM withdrawals, and even buying money orders at the post office.

The card also carries real consumer protections. Balances are FDIC-insured up to the legal limit, federal rules protect you from billing errors under Regulation E, and Mastercard won’t hold you responsible for charges you didn’t make when you report them promptly. This matters, because the card is the government’s answer to the obvious objection: what about people who can’t or won’t open a bank account?

On its direct deposit page, SSA calls direct deposit “is the best electronic payment option” and tells new applicants they must elect an electronic method when they enroll. Current check recipients are told to switch. Treasury grants exceptions only in what SSA describes as extremely rare circumstances.

How rare? According to a Social Security post on the transition, the shift to electronic payments will primarily affect a small group of beneficiaries, less than one percent, who still get paper. A local TV segment summarizing the change put that number at roughly 521,000 people out of tens of millions.

Small, but not random. That last one percent skews older, poorer, more rural, and more likely to be disabled. Hold that thought, because it becomes the heart of the fairness debate later.

Why the IRS refund lives in a different box

The IRS wants you to choose direct deposit. Its refund guidance calls direct deposit the best way to get a refund and notes there’s no risk of a check being stolen or lost in the mail. It also points out that electronic filers who pick direct deposit usually get paid in under 21 days, while a mailed refund check can take six weeks or longer.

But wanting is not the same as requiring. Because tax refunds sit outside § 3332, the IRS encourages direct deposit and still hands you a paper check as a standard option.

It even builds in a rule that produces paper checks on purpose. No more than three direct deposit refunds a year made into a single financial account or prepaid debit card, the IRS says. After the third, additional refunds get mailed as checks.

The point is fraud prevention: a flood of refunds into one account is a classic sign of identity theft. The side effect is that families or roommates who share an account can end up with a check even when everyone would rather have direct deposit.

Scale is the other reason paper persists here. In fiscal year 2025, the IRS issued 116.9 million refunds to individuals, totaling $516.4 billion, plus 14.0 million refunds to businesses. Even a small paper share of that becomes millions of envelopes.

And unlike Social Security, where you enroll in direct deposit once and forget it, refunds reset every year. You have to make the right choice and enter the right routing number each filing season. That makes taxpayer behavior far harder to move than a one-time enrollment campaign.

The two agencies do occupy different legal ground. Here’s the contrast in one view.

Sources: 31 U.S.C. § 3332, SSA direct deposit guidance, and IRS refund guidance.

The 2025 order that moved the default, but couldn’t move the statute

In March 2025, President Donald J. Trump signed Executive Order 14247, “Modernizing Payments To and From America’s Bank Account.” Its argument is a cost-and-risk argument. The order states that Treasury checks are “16 times more likely to be reported lost or stolen, returned undeliverable, or altered than an electronic funds transfer (EFT).” It puts the cost of maintaining the physical infrastructure and specialized technology for digitizing paper records at over $657 million in fiscal year 2024.

The order tells Treasury to stop issuing paper checks for federal disbursements starting September 30, 2025, except as carved out in the order itself, and it adds four words that carry enormous weight: “to the extent permitted by law.”

That phrase is where the executive branch meets its own ceiling. An executive order cannot rewrite § 3332. Because Congress placed tax refunds outside the definition of “Federal payments,” Treasury cannot force every refund into electronic form by decree. The IRS says it is phasing out paper refund checks, but a full elimination would take an act of Congress.

A Duane Morris legal alert summed up the order plainly, noting that it essentially requires all payments to and from the federal government to be electronic, with “limited exceptions.” Those two words, limited exceptions, are doing a lot of quiet work. They are the last legal home of the paper check.

Social Security moved faster. In a September 2025 letter to advocates titled Social Security Transitions to Electronic Payments, the agency’s Chief Communications Officer, Nick Perrine, explained that as of September 30, in line with the order, benefit payments would primarily be issued electronically. The letter said SSA was reaching out to remaining check recipients and directed anyone seeking an exemption to file a waiver with the U.S. Treasury by calling 1-877-874-6347.

One detail in that letter matters for new claimants. SSA said it would no longer offer a temporary check while direct deposit gets set up. That short-term paper option, a bridge for people mid-enrollment, is gone.

Who still gets a check, and why the rules protect them

The people left on paper are the reason the exceptions exist. Treasury’s waiver rule, 31 C.F.R. § 208.4, allows paper when electronic delivery would be impractical, would not be cost-effective, or would impose hardship. It also handles disasters, though narrowly: a disaster waiver is limited to payments made within 120 days after the disaster is declared, and an agency must file a waiver request with Treasury.

That last clause reveals a design choice. Treasury, not the individual agency, holds the final say on waivers. SSA staff can help you assemble the paperwork, and a city government summary lists a Treasury hardship line at 1-855-290-1545, but the decision runs through Treasury.

The strongest case for keeping paper rests on who the unbanked are. According to National Disability Institute analysis of FDIC data, the national unbanked rate fell from 8.2 percent in 2011 to 4.2 percent in 2023, adding more than five million banked households.

But the averages hide the gap. That same analysis found the unbanked rate for working-age households with disabilities was 11.2 percent in 2023, nearly three times the rate for households without disabilities. Households with disabilities made up 21.5 percent of all unbanked households that year, down from 26.9 percent in 2021. They are also less likely to use mobile banking and more than twice as likely to lack mainstream credit access.

For someone without a bank account, direct deposit isn’t an option until they open one. For someone with a cognitive or psychiatric disability, safeguarding a physical check and cashing it with a trusted person’s help can be easier than managing PINs, passwords, and account alerts.

According to a Bonadio Group analysis, taxpayers without traditional banking access would be most affected, especially low-income, elderly, and rural Native American filers.

The strongest version of their concern: the small size of the remaining paper cohort is not evidence that it faces low risk. It is evidence that this group is the hardest to reach, and a waiver process that requires a phone call and a form may be least accessible to exactly the people it is meant to protect.

The proponents’ reply is grounded partly in the government’s own numbers. Paper checks are “over 16 times more likely to be lost, stolen, altered, or delayed than electronic payments.”

Independent evidence points the same direction. A USPS Office of Inspector General audit documented rising mail theft and volumes of stolen checks moving through the mail stream, and, according to the Electronic Payments Coalition’s summary of a GAO report, electronic disbursement lowers government costs and eases payment delivery.

For a beneficiary living month to month, a stolen check can mean no rent until a replacement clears. They weigh mail theft against digital exclusion differently.

The letters are a separate story, and mostly about due process

Ask why the IRS still floods mailboxes with paper and most people picture checks. The bigger volume is notices, and notices follow a different logic entirely.

Certain IRS letters are not informational. They are legally operative. A notice of deficiency, for instance, starts the clock on your right to petition the U.S. Tax Court before the agency can assess additional tax.

For those notices, the Internal Revenue Code has long keyed the agency’s obligation to mailing the letter to your “last known address.” What counts, legally, is the act of mailing, not whether you happened to read it.

That is why high-stakes IRS mail so often goes by certified or registered mail, which proves it was sent. The agency needs to prove it sent the thing, and when. A mailed letter to a physical address comes with decades of settled law about proof of delivery. An email that lands in a spam folder does not.

Social Security runs on the same principle. It decides eligibility, reviews disability status, and assesses overpayments, and each of those actions requires written notice explaining the decision and the appeal rights that attach to it. A beneficiary can be fully electronic on payments and still receive a paper letter when the agency schedules a continuing disability review or says money must be repaid.

Moving these to purely electronic notice isn’t a matter of buying better software. It would require Congress and the courts to bless electronic delivery as the legal equivalent of mail for decisions that take away someone’s money or benefits.

Until that happens, the letter to your last known address remains the safe method that holds up in court. The check may be leaving. The notice has a much longer lease.

What analysts warn lies ahead: rushed timelines and missing cost math

The Tax Law Center at NYU and the Illinois Tax School warn that the transition’s strain will show up not in the law but in the implementation.

A blog post from the Tax Law Center at NYU warned that a rushed rollout of the order risks harming taxpayers, pointing to the large stock of prior-year returns that carry no direct-deposit information at all.

The Illinois Tax School described the practical workaround: a return without banking information still gets accepted, and the IRS mails a letter asking for account details. If none arrives, it eventually issues a paper check anyway to avoid paying interest on a delayed refund.

There is also a question the government has not fully answered in public: what does each payment cost? The order leans on a single headline figure, over $657 million a year to maintain physical infrastructure and specialized technology for digitizing paper records, and on the 16-times risk statistic.

Neither tells you the added cost of one more check versus one more transfer. A separate line of analysis would want the cost of each individual payment, the kind of figure the Government Accountability Office usually produces, before you can judge how much the last cohort of checks costs to keep.

Treasury seems to know the answers aren’t all in. On May 30, 2025, it published a Request for Information asking the public how to implement the order. The notice invited comment on the opportunities and challenges associated with transitioning to fully electronic Federal payments and collections, with comments due, per the notice, “on or before June 30, 2025.” The office running it, Consumer Policy, is led by staff including Director Christopher Curtis and Senior Advisor Nora Esposito, whose job is to weigh access against efficiency.

The statute set the default decades ago, the order pushed the default further, and the paper check now survives in the gaps between them. Those gaps are three: the tax carve-out Congress wrote on purpose, the hardship waiver Treasury still has to grant, and the legal notice that has to reach you whether or not you ever open a bank account.

Whether the remaining paper checks disappear depends on how well the waiver process and fallback procedures serve the hardest-to-reach recipients, a question the next filing season will test.

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