The U.S. Department of the Treasury has announced that, starting September 30, 2025, the federal government will stop issuing paper checks for most federal payments—including IRS tax refunds. The change is part of a broader initiative to improve security, reduce fraud and theft, and speed up payment delivery by transitioning to electronic methods.

At the same time, federal agencies—including the IRS—are moving incoming payments (what taxpayers send to the government) to electronic processing “as soon as practicable.” Treasury’s implementation guidance instructs agencies to phase out lockbox processing and adopt digital collection solutions. While that signals paper checks for tax payments are being phased down, a single, IRS‑specific cutoff date for mailed check payments has not been posted as of today.

Key takeaways

• Refunds: The IRS will no longer mail paper refund checks in the ordinary course for payments issued on or after Sept 30, 2025 (limited exceptions apply “to the extent permitted by law”). Plan now for direct deposit or another approved electronic refund option.
• Paying the IRS: Agencies are directed to process all receipts electronically as soon as practicable and eliminate lockboxes, which means paper checks for tax payments are being phased out. Move to electronic payment methods now to avoid disruption.
• What to use: Recommended options include IRS Direct Pay, EFTPS, and debit/credit card or digital wallet via IRS‑approved processors (fees may apply; cards aren’t for payroll tax deposits).

What’s changing for IRS refunds

Beginning September 30, 2025, federal disbursements will be electronic by default. For the IRS, that means no routine paper refund checks after that date. Exceptions will be limited and grounded in law and Treasury guidance. Electronic delivery is faster and significantly reduces the risk of mail theft and check fraud.

Direct deposit is the fastest way to receive your refund. Don’t have a traditional bank account? Some mobile apps and reloadable prepaid debit cards support direct deposit when they provide routing and account numbers—check with your provider to confirm.

What’s changing for payments to the IRS

The March 25 Executive Order directs the government to move all federal payments and collections to electronic methods, and Treasury’s implementation guidance tells agencies to eliminate lockboxes and process all receipts electronically “as soon as practicable.” For taxpayers, this means a continuing shift away from mailing checks to pay balances due or estimated taxes. Transition now, even though the IRS has not published a single hard cutoff date for accepting mailed checks as of this writing.

Your electronic options (and when to use them)

1) IRS Direct Pay (ACH from your bank account)

Best for individuals paying 1040‑series balances, extensions, or estimates. No fees; schedule each payment as needed.

Learn more: https://www.irs.gov/payments/direct-pay

2) EFTPS — Electronic Federal Tax Payment System

Ideal for businesses (and individuals who want scheduling, history, and recurring payments).

Plan ahead: after you enroll online, your PIN typically arrives by U.S. mail in about 5–7 business days before you can activate and pay.

Enroll: https://www.eftps.gov/eftps

3) Debit/credit card or digital wallet (IRS‑approved processors)

Convenient for one‑off payments; processing fees apply.

Note: You cannot pay federal payroll tax deposits by card—use EFTPS for those.

Options: https://www.irs.gov/payments/pay-your-taxes-by-debit-or-credit-card

If you receive federal benefits by paper check

This policy change covers most federal disbursements. If you still get a paper check for Social Security, VA, or other benefits, switch to direct deposit or, if eligible, a Treasury‑sponsored Direct Express® card using the options Treasury lists.

Enroll at GoDirect: https://www.godirect.gov/

Or call Treasury’s Electronic Payment Solution Center: 800‑967‑6857 (Mon–Fri, 9:00 a.m.–7:00 p.m. ET).

Always verify requests to change your payment method to avoid scams.

FAQ

Will the IRS still accept mailed paper checks after September 30, 2025?

Treasury’s guidance requires agencies to process all receipts electronically “as soon as practicable” and to phase out lockboxes, but it doesn’t set a single nationwide cutoff date for mailed checks to the IRS. The direction is clear: move to electronic payments now to avoid disruption.

What are my options if I don’t use a traditional bank account?

Some mobile apps and reloadable prepaid debit cards accept direct deposit if they provide routing and account numbers. Confirm with your provider before filing.

How long does EFTPS enrollment take?

After you enroll online, your PIN typically arrives by U.S. mail within about 5–7 business days. You’ll then activate and set your online password before making payments.

Why is the government ending most paper checks?

To fight fraud and theft, reduce costs, and speed up payments. The Executive Order mandates modernizing payments to and from the federal government, and Treasury is implementing it across agencies.

Are there any exceptions to electronic refunds or payments?

Yes, the policy allows limited exceptions “to the extent permitted by law.” Treasury will publish exception processes where needed.

We can help you switch—today

Our team will help you choose the right electronic method for refunds and payments, enroll you in EFTPS if needed, and set up direct deposit accurately.

Contact us to get started now and avoid last‑minute scrambling.

For Washington’s investors and business owners, 2025 marks a pivotal shift in the financial landscape. A new era of taxation has begun, with the state implementing a capital gains tax rate that can reach as high as 9.9% on profits from the sale of long-term assets like stocks, bonds, and business interests. This change demands more than a simple adjustment to your tax filings; it calls for a fundamental reassessment of your asset management strategy.

Legally, this tax is classified as an excise tax on the act of selling or exchanging assets, a distinction upheld by the Washington Supreme Court, rather than an income tax. The revenue generated is earmarked to fund critical state priorities, including education, early learning, and childcare programs.

The New Reality: Washington’s Two-Tier Capital Gains Tax Structure

Effective January 1, 2025, Washington’s capital gains tax moves from a single rate to a two-tiered system :

• Tier 1 (7% Base Rate): Applies to the first $1 million of taxable capital gains (the amount of your gain after the standard deduction).
• Tier 2 (9.9% Surtax Rate): For taxable capital gains exceeding $1 million, a 2.9% surtax is added, bringing the total marginal rate to 9.9%.

A standard deduction, which is adjusted annually for inflation, is available to all filers. For 2024, this deduction was $270,000. Crucially, the $1 million threshold for the higher surtax is not indexed for inflation, meaning that over time, more taxpayers will likely find their gains falling into the higher bracket.

For example, if you realize a $1,500,000 taxable gain in 2025 (resulting in a $1,230,000 gain after the $270,000 deduction), your total tax liability would be $92,770. This is $6,670 more than under the previous 7% flat-rate system. The tax impact grows exponentially with the size of the gain.  

The Critical Question: What Is Exempt from the Tax?

Fortunately, the tax does not apply to all asset sales. The Washington State law (RCW 82.87) provides several key exemptions:

• Real Estate: All gains from the sale of real estate—including commercial buildings, land, and rental properties—are fully exempt from Washington’s capital gains tax. When selling an interest in an entity that owns real estate, the exemption applies only to the portion of the gain directly attributable to the property’s value, making an accurate appraisal essential.
• Qualified Family-Owned Small Businesses (QFOSB): Gains from the sale of a qualifying small business may be deductible. The primary requirements include:
  • The business must have worldwide gross revenue below a certain threshold ($10,790,000 for 2024) in the 12 months preceding the sale.
  • The taxpayer or their family members must have owned the business for at least five years and “materially participated” in its operation for at least five of the ten years before the sale.
  • Retirement Accounts: Capital gains realized within federally qualified retirement accounts, such as 401(k)s, IRAs, and Roth IRAs, are not subject to the tax.

  Advanced Tax-Saving Strategies: Beyond Simple Timing

  Effective tax planning requires a sophisticated approach based on a clear understanding of state law. Some widely known federal strategies may not apply in Washington, creating potential pitfalls for the uninformed.
   

  Strategies Requiring Caution

  • Qualified Opportunity Funds (QOFs): While the federal government offers significant tax deferrals for investing capital gains in QOFs, Washington State does not recognize this benefit. Even if you reinvest your gains into a QOF, you must still pay the Washington capital gains tax in the year the gain was realized.
  • Federal SALT Deduction: Attempting to deduct your Washington capital gains tax payment on your federal return is unlikely to succeed. The tax’s classification as an “excise tax” likely makes it ineligible for the State and Local Tax (SALT) deduction, which is primarily for income, sales, and property taxes. Furthermore, the federal SALT deduction is capped (at $10,000, though temporarily raised to $40,000 for 2025 with phase-outs for high earners), limiting its utility for those with significant tax liabilities.

  Effective Strategies for Washington

  • Qualified Small Business Stock (QSBS): This remains one of the most powerful tax-saving tools. Washington’s tax calculation begins with your federal net long-term capital gain. Under federal law (IRC §1202), gains from the sale of QSBS held for over five years can be excluded from federal tax. Because it is excluded at the federal level, the gain is also automatically exempt from Washington’s capital gains tax. This provides a strong incentive for founders and early-stage investors to structure their businesses as C-Corporations.
  • Installment Sales: Structuring the sale of an asset to receive payments over several years allows you to spread the recognition of the gain. This can help keep your annual gain below the $1 million surtax threshold, or even below the standard deduction, thereby reducing or eliminating your tax liability.
  • Change of Domicile: For intangible assets like stocks and bonds, the tax is based on the seller’s domicile at the time of the sale. Legally establishing residency in a state with no capital gains tax (such as Nevada or Texas) before a major liquidity event is a valid strategy. However, this requires a genuine relocation, substantiated by clear evidence like a new driver’s license, voter registration, and primary home, as the state will scrutinize such moves closely.

  Proactive Design, Not Post-Sale Reaction

  Washington’s new capital gains tax structure presents a complex but navigable challenge. The key to preserving your wealth lies not in last-minute maneuvers but in proactive, informed planning. The law itself, particularly the robust exemptions for real estate and qualified small businesses, offers the most reliable paths to tax efficiency. Before signing any major asset sale agreement, it is imperative to consult with a tax professional. A well-designed strategy, tailored to your specific circumstances and grounded in a thorough understanding of Washington’s tax code, can save you tens or even hundreds of thousands of dollars. In the 9.9% era, successful asset management begins long before the sale is final.

For many businesses headquartered in a single state, such as Washington, California, or New York, operations often extend far beyond their home base. Whether serving clients in other states, employing a remote workforce, or selling products nationwide, these interstate activities can trigger significant tax responsibilities in those other states. Overlooking these obligations can lead to costly penalties, back taxes, and interest. Understanding the concept of “nexus” is the first step to ensuring compliance.

What is Nexus?

“Nexus” is a legal term that describes the connection a business has with a state that is significant enough to require the business to comply with that state’s tax laws. Historically, nexus was primarily established by a physical presence, such as an office, warehouse, or employee in a state. However, the modern business landscape, driven by e-commerce and remote work, has led to a much broader definition.

Today, nexus is not just about physical location. It can also be created through economic activity, a concept solidified by the 2018 Supreme Court decision in South Dakota v. Wayfair, Inc. This ruling affirmed that states can require businesses to collect and remit sales tax even if they have no physical presence in the state, provided they meet certain economic thresholds.

When Do Tax Obligations Arise in Other States?

A variety of business activities can establish nexus in a state where your company is not headquartered. The likelihood and nature of the tax obligation can vary based on the specific activity.

What Types of Taxes are Involved?

Once nexus is established, your business may be responsible for several types of state taxes:

State Income Tax: If your business generates revenue from customers in another state, you may be required to file a state income tax return and pay taxes on the portion of your income earned there. For instance, a Washington-based marketing firm that provides consulting services to a client in California may need to file a California income tax return if it meets the state’s nexus criteria.

Sales Tax: If you sell goods or taxable services to customers in another state where you have nexus, you are generally required to register for a sales tax permit, and then collect and remit sales tax on those transactions. For example, a business selling over $500,000 of products annually to Texas consumers online would be required to register and collect Texas sales tax.

Payroll Tax: When you hire an employee who lives and works in a different state, you must comply with that state’s payroll tax laws. This includes registering as an employer in that state, withholding state income tax from the employee’s wages, and paying state unemployment taxes. A Seattle company hiring a remote developer in Oregon, for example, must register with Oregon and manage withholdings accordingly.

A Practical Case Study

Consider an IT company headquartered in Washington. The company has a remote employee living in Arizona and provides software services to clients in both Arizona and Texas. Although the company has no physical office outside of Washington, it has unknowingly created tax obligations in multiple states:

Arizona: The presence of a remote employee establishes nexus. The company is now required to file for and pay Arizona payroll taxes. Furthermore, revenue generated from Arizona-based clients may be subject to the state’s income tax, requiring the company to apportion its income.

Texas: By selling a significant volume of software services to Texas clients, the company has likely exceeded the state’s economic nexus threshold for sales tax. It must now register to collect and remit Texas sales tax.

This example illustrates how business activities, not just physical locations, are the determining factor for multi-state tax obligations.

How to Prepare and Stay Compliant

Navigating multi-state taxes requires a proactive approach:

1. Analyze Your Footprint: Regularly review your business activities, including the location of your customers, employees, and contractors, to identify potential nexus risks.
2. Track Revenue by State: Configure your accounting system to track sales on a state-by-state basis. This will help you monitor whether you are approaching economic nexus thresholds.
3. Conduct Due Diligence: Before hiring a remote employee or expanding into a new market, research the tax regulations of the relevant states to understand your potential obligations.
4. Leverage Automation: Utilize tax compliance software to automate the calculation, collection, and remittance of sales tax and to help manage payroll tax requirements across different states.

In an increasingly borderless economy, a business’s tax responsibilities are no longer confined to its headquarters’ location. Proactive management and a clear understanding of nexus are essential for sustainable growth and avoiding the financial and legal burdens of non-compliance. As your business expands, so too must your diligence in managing its tax obligations.