Millions of individual taxpayers who file returns without valid bank account details will see their refunds temporarily frozen starting in the 2026 filing season. The IRS, acting under Executive Order 14247 signed on March 25, 2025, is phasing out paper refund checks for individuals and replacing them with a direct-deposit-first system. Filers who lack or provide incorrect banking information will receive a CP53E notice and must respond within 30 days or face extended delays in getting their money.
How Executive Order 14247 Changes Refund Delivery
The shift traces directly to Executive Order 14247, which directed federal agencies to modernize payment systems and reduce reliance on paper checks. The IRS tied its operational rollout to that order through a set of modernizing payments materials, framing the change around fraud reduction, faster delivery, and lower costs. According to the IRS, paper checks are “far more likely to be lost/stolen/altered/delayed” than electronic transfers.
The practical effect for filers is straightforward but disruptive. According to guidance from the taxpayer advocate, returns filed without direct deposit information can still be processed in 2026, but the refund itself is temporarily frozen until the taxpayer either provides bank details or requests a paper check. That freeze applies even when a return is otherwise complete and error-free. Rejected direct deposits trigger the same hold, with the IRS treating them as if no valid account were on file.
The hypothesis that this mandate will push unbanked filers into opening bank accounts at a measurable rate deserves scrutiny. The IRS points filers toward FDIC resources and other tools for opening accounts, but no public data yet quantifies how many filers lack valid direct deposit information or how many have responded to CP53E notices by opening new accounts rather than requesting paper alternatives. Without that data, the connection between the mandate and bank-account adoption remains plausible but unproven.
CP53E Notices and the 30-Day Update Window
When a refund cannot be direct-deposited because banking information is invalid, missing, or rejected, the IRS issues a CP53E letter. That notice explains that the agency has placed a hold on the refund and gives the taxpayer 30 days to update their bank information through the IRS Online Account portal or by following other instructions in the notice. Filers who miss the window or cannot access the portal face additional delays, though the IRS states that taxpayers who do not respond can still eventually receive their refund through alternative means.
The 30-day clock creates a real burden for people without reliable internet access or who distrust sharing banking details online. The IRS Online Account requires identity verification, which itself can be a barrier for older adults, recent immigrants, and others who may not have the specific identification documents or credit history the system demands. Taxpayers who cannot clear those hurdles must rely on phone or mail options, which are slower and may be harder to navigate, especially in communities with limited tax preparation support.
Conflicting Signals on Paper Check Availability
Two official sources send different signals about whether paper checks will remain an option at all. The Taxpayer Advocate Service indicates that filers can still request a paper check if they do not want to provide bank information, but that doing so will generally mean a longer wait than choosing direct deposit. By contrast, the IRS’s modernization materials emphasize a gradual “phaseout” of paper refunds and highlight direct deposit as the default, without clearly spelling out how long paper checks will continue or whether certain groups might ultimately be required to use electronic options.
This tension matters for unbanked and underbanked households, who may already struggle with account fees, minimum balances, or prior negative banking history. If paper checks remain available but slower, those taxpayers face a trade-off between speed and comfort. If paper checks are eventually eliminated altogether, the policy could effectively force people into financial products they have previously chosen to avoid. For now, the record shows only that paper checks will be harder to obtain and that the process for requesting them will run through the same CP53E notice pipeline.
What Taxpayers Can Do Before the 2026 Season
Taxpayers who expect refunds in 2026 can reduce the risk of delays by confirming their banking information well before filing. That means checking that routing and account numbers are current, that the account is still open and in their own name, and that any joint-account arrangements are acceptable to their financial institution. Those who are unbanked or prefer not to use a traditional bank account can explore low-fee accounts or prepaid debit products that accept direct deposits, weighing the costs and protections against the convenience of faster refunds.
Equally important is watching the mail and online IRS accounts for any CP53E notices once a return is filed. Responding within the 30-day window, whether to correct bank details or to request a paper check where permitted, will be the key to avoiding months-long holds. While Executive Order 14247 aims to modernize federal payments, the early years of implementation will test whether the promised efficiencies can be delivered without sidelining taxpayers who are least equipped to navigate a digital-first refund system.
