IRS Director Elaborates on Transition from Paper Checks Starting in 2026
The IRS is moving forward with plans to phase out paper check refunds, beginning with tax year 2025 filings processed in 2026. Denise Davis, a director in the IRS Taxpayer Services Division, confirmed that the agency will prioritize individual taxpayers in the early stages, with a goal of increasing the current 91.5% electronic refund rate. Taxpayers who don’t provide banking information will receive IRS notices and be prompted to update their details through their Individual Online Account. If no action is taken, refunds will be held for up to six weeks before being issued to avoid interest penalties.
For business filers—only 4% of whom currently use direct deposit—the IRS will begin collecting banking information via revised tax forms starting in 2026. The agency also plans to expand refund options beyond checking and savings accounts to include debit cards and digital payment accounts. Special considerations are being developed for groups with more complex needs, such as international taxpayers and those filing amended returns. The IRS expects to refine and adjust its approach throughout the 2026 filing season, with broader digital expansion efforts continuing into 2027.
IRS Releases Contingency Plan Ahead of Government Shutdown
The IRS has shared its shutdown contingency plan, with an agreement on Fiscal Year 2026 federal funding still not made after the October 1 deadline, leading to a current government shutdown. Unlike previous plans, all IRS employees are now classified as essential, indicating broader continuity of operations even outside the January–April filing season. The agency plans to use Inflation Reduction Act funding to maintain services, though its workforce has dropped from over 95,000 in March to just over 74,000.
The shutdown occurred as the midnight funding deadline approached on Tuesday evening and parties stood firm on their positions. While a continuing resolution to fund the government through November 21 passed the House, it had not gained the support needed in the Senate. The top demand that could not be agreed on was an extension of the soon-to-expire enhanced Affordable Care Act premium tax credit. The AICPA has raised concerns that a shutdown could delay the processing of extended 2024 tax returns due in October, November, and December, as well as slow the release of key tax guidance tied to recent legislation, including the “One Big Beautiful Bill.” While Treasury has also issued its own contingency plan, it warns of a significant reduction in operations if the lapse extends beyond five days.
Crypto Brokers Required to Report Sales and Basis Information Starting in 2025
Beginning with the 2025 tax year, cryptocurrency brokers will be required to report clients’ digital asset sales and cost basis information to both the IRS and taxpayers. This new reporting obligation, finalized under IRS regulations implementing provisions of the Infrastructure Investment and Jobs Act, is intended to align crypto tax reporting with traditional securities reporting (e.g., Form 1099-B). The goal is to enhance tax compliance and reduce the reporting burden on individual taxpayers by providing clear transaction data directly from brokers.
Under the new rules, brokers must issue informational returns that include gross proceeds, acquisition and sale dates, and cost basis where available. Taxpayers will receive this information to help accurately report capital gains and losses on their returns. The IRS has emphasized that these requirements will improve transparency in the digital asset space, and affected taxpayers should begin preparing for expanded reporting in early 2026, when the 2025 tax forms are filed.
IRS Finalizes Regulations Removing Associated Property Rule with § 263A
On October 1, 2025, the IRS and Treasury finalized regulations (TD 10034) removing the associated property rule under Treas. Reg. § 1.263A-11(e) for improvements to both real property and tangible personal property that is temporarily withdrawn from service. This change affects § 263A uniform capitalization (UNICAP) rules and specifically targets property that is not in use at the time of improvement.
The final regulations make only minor clarifying changes to the proposed regulations issued in response to the Federal Circuit’s decision in Dominion Resources, Inc. v. United States, 681 F.3d 1313 (Fed. Cir. 2012). This final guidance provides greater clarity for taxpayers making capital improvements to idle property, aligning the regulations with the court’s interpretation.
