Say Goodbye to Federal Paper Checks

If your business still receives government payments by paper check, it’s time to start planning for a change. The U.S. Treasury has announced that nearly all federal payments will be issued electronically by September 30, 2025, marking the end of an era for paper-based transactions.

Whether you’re a small retail shop, a growing consultancy, or a family-owned service business, this shift will likely affect how you receive tax refunds, government reimbursements, and other federal funds.

Why the Change?

The federal move toward digital payments is part of a broader effort to modernize systems, reduce fraud, and cut costs. Electronic payments are faster, safer, and more cost-effective, benefiting both government agencies and recipients.

For Connecticut’s small and mid-sized businesses, this shift could actually be a benefit, but you need to be for it.

How It Could Impact Your Business

If your business currently receives federal payments via check (like IRS refunds, contract reimbursements, or small business program funds), here’s what you can expect:

Faster access to funds – No more waiting for the mail. Direct deposits arrive more quickly.
Reduced risk – Digital transfers lower the chances of lost or stolen checks.
Easier recordkeeping – Electronic payments simplify tracking and reconciling your books.

For companies that rely on steady cash flow to cover payroll, inventory, or vendor payments, this added speed and security can be a real advantage.

What About State-Issued Checks?

At this time, Connecticut has not formally announced a similar transition for state-issued payments. While the state has expanded its use of direct deposit in many areas, paper checks are still issued for some refunds and payments. We recommend opting into electronic payments wherever possible to avoid potential delays or disruptions.

What You Should Do Now

Here’s how to prepare your business for the change:

Set up or confirm your direct deposit with the IRS – Ensure your banking info is correct every time you file.
Review your government contract payment preferences – If your business works with federal agencies or programs, check your payment method.
Audit your internal systems – Is your bookkeeping software ready to handle more digital payments? Now’s the time to clean up any outdated processes.
Talk to your vendors and clients – Many private organizations are also phasing out paper checks. Make sure you’re aligned across the board.

What Happens If You Don’t Update?

If you don’t provide electronic payment info, you may face delays, or worse, receive a prepaid debit card instead. These cards are harder to track, can include additional fees, and pose higher risk for loss or misuse. They also complicate your accounting and cash management processes.