IRS to Eliminate Paper Refund Checks: What Non-U.S. Sellers Need to Know

In a major shift toward digital tax processing, the Internal Revenue Service (IRS) has announced it will discontinue issuing paper refund checks starting September 30, 2025. This policy will significantly impact non-U.S. persons receiving tax refunds related to the sale or disposition of U.S. real property interests.

What’s Changing?

According to Kat Rodgers of Foreign Tax CPA, this update means the IRS will now only issue refunds electronically via direct deposit to U.S. bank accounts. Here's how it breaks down:

• Applies to refunds from:

  • Form 8288-A & Withholding Certificates

  • Form 1040NR (nonresident alien tax returns)

  • Form 1120-F (foreign corporation tax returns)

• No more paper checks—not even upon request

• No refunds to foreign bank accounts

• No international wire transfers

  
  

Why the Change?

The IRS is moving toward a fully electronic refund system in an effort to:

• Reduce paper-based processing delays

• Improve security and fraud prevention

• Streamline refund delivery

  
  

How Should Non-U.S. Sellers Prepare?

International tax professionals and real estate partners should act now to prepare for this transition. Rodgers recommends the following:

1. Set Up a U.S. Bank Account Early: Ensure foreign sellers have a U.S. bank account ready during the sale process.

2. Explore Alternatives: If a U.S. account isn't feasible, work with a qualified intermediary or escrow agent who can handle refund disbursements on behalf of the seller.

3. Plan Ahead for Fall 2025 Transactions: Sellers closing in late 2025 or beyond must be made aware of these changes to avoid unnecessary refund delays.

Key Takeaway

This shift is part of the IRS’s broader strategy to modernize and digitize tax processes. If you represent or work with non-U.S. sellers of U.S. real estate, it’s crucial to adapt early to avoid complications down the line.

Need Help Navigating FIRPTA Changes? At American Title Trust, we understand the complexities of FIRPTA and IRS refund procedures for foreign sellers. Let our experienced team guide you through every step securely, efficiently, and with full compliance.

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