Electronic-Only IRS Payments Ahead: What Taxpayers and FIRPTA Buyers Need to Know

The federal government is accelerating its transition toward modernized, secure, and fully electronic tax payment systems. Under Executive Order 14247, Modernizing Payments to and From America’s Bank Account, the IRS will begin phasing out paper refund checks and paper-based remittances for federal tax payments. One of the most significant effects of this policy involves transactions subject to the Foreign Investment in Real Property Tax Act (FIRPTA), a U.S. tax law that requires foreign individuals to pay taxes on income or gains from the disposition of U.S. real property interests.

Beginning September 30, 2025, FIRPTA withholding payments must be submitted electronically through the Electronic Federal Tax Payment System (EFTPS), and paper checks are no longer accepted. This shift is designed to reduce fraud, improve processing accuracy, and accelerate payment timelines. However, for buyers, title professionals, and foreign sellers, it introduces new procedural challenges that require early preparation.

End of Paper Refund Checks

Taxpayers will still file returns the same way, but refunds will shift almost entirely to direct deposit or other approved electronic methods. Direct deposit remains the fastest option, while paper checks, which are far more likely to be lost, stolen, or delayed, will be phased out.

FIRPTA Payments Must Be Made Electronically

Starting September 30, 2025, buyers in transactions involving foreign sellers must remit FIRPTA withholding exclusively through the EFTPS. Missing the electronic payment deadline can result in IRS penalties, interest, and delays.

Impact on Buyers and Withholding Agents

• It’s best to identify whether the seller is foreign and begin planning for withholding as early as possible. In order to activate an EFTPS account, a U.S. mailing address is required to receive the PIN by mail. Receiving the mailed PIN can take 7–10 business days (or longer internationally), and buyers have only 20 days after closing to remit FIRPTA funds.
• A U.S. bank account may be required. This practical hurdle is often overlooked as foreign buyers without a U.S. banking relationship may need assistance, as many large banks will not open accounts for non-U.S. individuals.
• Waiting until closing to identify a foreign seller may create timing risks that could delay or jeopardize compliance.

Impact on Title Companies and Closing Agents

Title companies, settlement agents, and closing attorneys are often tasked with handling FIRPTA withholding on behalf of buyers. Under the new rules, agents must incorporate FIRPTA review, EFTPS enrollment confirmation, and multi-factor authentication (MFA) access (e.g., ID.me or Login.gov) into pre-closing procedures. Even when an agent assists, the buyer remains legally responsible for timely remittance.

Additional 1% Excise Tax in 2026

Beginning January 1, 2026, an additional 1% excise tax will apply to certain transfers of funds outside the U.S., including potentially those related to real-estate sales. This is separate from FIRPTA withholding and may apply even when the receiving party is a U.S. citizen. Further IRS guidance is expected.

How Tax Professionals Can Help

These procedural changes introduce new compliance risks and opportunities, making it essential to consult experienced international tax professionals, such as Baker Tilly x Anchin’s International Tax Practice. These specialists can assist buyers, title professionals, and foreign sellers with FIRPTA compliance, EFTPS setup planning, transaction advisory, and navigating the new excise tax rules, and help ensure timely remittance, reduce risk, and support smooth closings.

For guidance on how these developments may affect your next transaction, please contact Kevin Brown or Gwayne Lai of Baker Tilly x Anchin, or your Baker Tilly x Anchin Relationship Professional.