Last Updated 8 months ago

My brother recently had to wait for his IRS refund to arrive by check.  The process was long and painful.  It took multiple phone calls to the IRS and over a year from when the return was filed.  

According to a new IRS release, it will be even harder for him if the same situation ever happens again. This situation is not unique to my brother. Similar situations have happened to many U.S. taxpayers and clients living abroad.

If you live outside the United States and file U.S. tax returns each year, you already know that small administrative changes can have outsized effects. A missed letter, a delayed notice, or a payment that does not post correctly can turn an otherwise routine filing season into months of uncertainty. That is why the IRS’s most recent update on how refunds and payments will be handled deserves special attention from Americans living abroad.

Key points

• The IRS is prioritizing electronic refunds and payments, while keeping the tax filing process itself largely the same.
• Refund delays for Americans living abroad may increase, not decrease, due to mail-based procedures and processing timelines.
• Access to U.S. banking remains a major constraint for many international taxpayers.
• International wire transfers exist as an option, but are often impractical for individuals.
• There are practical steps taxpayers abroad can take to reduce friction and surprises

The IRS has released new guidance explaining how it will move away from paper refund checks and rely more heavily on electronic payments. This update stems from a broader modernization effort initiated by an executive order, but the real impact comes from how the IRS is implementing those ideas in practice. For taxpayers living overseas, especially those without easy access to U.S. banking, the details matter far more than the policy headlines.

Below is a breakdown of what this release says, why it is happening now, why you should care, and what actions to take to prepare for this change.

The IRS Is Modernizing How Money Moves

The IRS’s new guidance reflects a broader effort to modernize how money moves between taxpayers and the government. Paper refund checks are slow to issue, costly to process, and more vulnerable to loss and fraud. From the IRS’s perspective, shifting to electronic payments is a logical step and long overdue.

It is important to note what is not changing. The way individual tax returns are filed remains the same. Forms, deadlines, and substantive tax rules are unaffected. The update focuses narrowly on how refunds are delivered and how payments are made.

The guidance itself stems from an executive order that directed federal agencies to reduce reliance on paper checks. However, for taxpayers, the executive order is background context. What matters is how the IRS has chosen to implement that directive. The new IRS release outlines the operational rules governing future refunds and payments, and those rules have very different implications depending on where you live.

For taxpayers residing in the United States, electronic refunds are already the norm. For many Americans living abroad, it is much more difficult to open or maintain a U.S. bank account, and the shift raises practical questions with no easy answers. Modernization may be necessary, but execution matters, particularly when international logistics are involved.

How Refunds Will Work When Banking Information Is Missing

Under the new guidance, the IRS continues to strongly prefer issuing refunds electronically. Direct deposit remains the fastest and most secure way to receive a refund, and the IRS encourages taxpayers to provide banking information whenever possible.

Even if a tax return does not include direct deposit information, the IRS will still process it. If a refund is due, the agency will initiate a follow-up process rather than immediately issuing a paper check. This process begins with the IRS mailing a notice to the taxpayer’s last known address.

That notice, referred to as a CP53E, requests that the taxpayer provide banking information so the refund can be issued electronically. The taxpayer is given a limited window to respond. Under current guidance, that response period is thirty days.

Banking details will not be requested by phone, text message, or email. Communication for this purpose will occur by physical mail and, in some cases, through messages displayed in IRS online tools. If the taxpayer does not respond within the allotted time and there are no other issues with the return, the IRS may eventually issue a paper check after additional internal processing. At a minimum, this means that refund checks will arrive much more slowly, and delays will be even longer than before.

Why This Process Often Breaks Down for Americans Living Abroad

For Americans living overseas, IRS mail is one of the weakest links in the entire tax administration process. Letters sent to international addresses are frequently delayed or never delivered. Even when they do arrive, weeks or months may pass between the date the IRS sends a notice and the date it reaches the taxpayer.

The 30-day response window built into the CP53E process assumes domestic mail timelines. For many international taxpayers, that assumption does not hold. By the time a letter is received, the response deadline may already be approaching or have passed.

Even when a taxpayer receives the notice in time and responds promptly, another layer of delay often follows. The IRS must receive the response, route it internally, and update its systems before any action is taken. 

The result is that refunds for Americans living abroad may take longer under the new system than they did under the old one. This is not because the taxpayer did anything wrong. It is a function of a process that relies on mail-based communication in a cross-border context.

These delays are procedural rather than punitive. Still, they can be frustrating and financially disruptive, especially for taxpayers who rely on predictable refund timing.

Direct Deposit Abroad Is Uneven in Practice

The IRS’s primary recommendation is simple. Use direct deposit. For taxpayers with a U.S. bank account, this advice is sound. Direct deposit is faster, more reliable, and less prone to administrative errors than paper checks.

However, access to U.S. banking is not universal among Americans living abroad. Many U.S. banks are unwilling to open or maintain accounts for customers who reside outside the United States. Compliance requirements, risk management policies, and regulatory concerns all contribute to this reality.

As a result, a significant number of Americans abroad do not have a U.S. bank account that can receive IRS refunds or be used to make electronic payments. For these taxpayers, the IRS’s preferred solution is not readily available.

Digital banking and financial technology platforms like Wise have partially filled this gap. Some services offer U.S. account details or payment rails that can be used in certain circumstances. These tools can be helpful, but they are not a universal solution. They often require additional setup, ongoing monitoring, and an understanding of how funds will move across borders.

For taxpayers expecting smaller refunds or making modest payments, the administrative effort involved may outweigh the benefit. In these cases, modernization shifts complexity away from the IRS and onto the individual taxpayer.

Some of these banking platforms also route funds from a phantom U.S. account to the international resident account through a third foreign bank account.  The result is additional accounts that need to be reported on U.S. required forms like the FBAR or FATCA Form 8938.  This adds further complexity and could result in penalties of $10,000 or more for U.S. citizens abroad, depending on the solutions used.

What the IRS Actually Says About International Taxpayers

The IRS’s new guidance does acknowledge the challenges faced by international taxpayers. In its published materials, the agency states that taxpayers living abroad should continue to use existing systems to file returns, make payments, and receive refunds.

The IRS also notes that wire transfers remain available for international payments and that it is developing secure alternatives. These alternatives may include partnerships with international payment providers and expanded cross-border payment options.

What the guidance does not provide are timelines or detailed explanations of how these future systems will work. For now, the message to international taxpayers is essentially to continue navigating the current patchwork of options while improvements are explored.

This acknowledgment is meaningful, but it also underscores that a fully implemented international solution is not yet in place. Especially considering that the service touts its wire transfer system, which is itself very unreliable.

International Wire Transfers Are Technically Available but Rarely Practical

For taxpayers without access to U.S. banking, international wire transfers are often cited as the fallback option. The IRS provides detailed instructions for wiring funds directly from a foreign bank account to the U.S. Treasury.

The IRS itself cautions that this method can be costly and encourages taxpayers to consider other payment options when available. Payments must be made in U.S. dollars and applied correctly to avoid misposting.

To initiate an international wire, the taxpayer must complete a same-day payment worksheet that includes the correct tax type code and tax period. This information must then be provided to a foreign bank that has a correspondent relationship with a U.S. bank. The taxpayer must also supply specific routing and account details for the destination bank.

In theory, this process allows an individual to pay U.S. tax obligations from abroad. In practice, it very rarely works. Based on my many years of experience working with international individual taxpayers, the successful completion of an IRS wire transfer by an individual is extremely rare. While the option exists on paper, it is neither practical nor scalable for most individuals.

Practical Steps Americans Abroad Can Take Now

While the new guidance introduces uncertainty, there are steps taxpayers living abroad can take to reduce friction and avoid unnecessary delays.

If you have access to a U.S. bank account, ensure that direct deposit information is included on your tax return. This remains the most reliable way to receive a refund under the new system.

Even if you are filing late returns, it is still important to include direct deposit information. Late-filed returns often trigger paper check workflows, but having banking details on file may reduce the need for follow-up correspondence.

If you do not have a U.S. account, consider whether a digital banking platform like Wise could be a good fit for your situation. These tools are not ideal for everyone, but they can provide a workable bridge in many cases.

Make sure that the address on file with the IRS is current and reliable. Refund-related communication is mail-based, and an outdated or unreachable address can all but guarantee delays and make receiving the refund checks impossible.

Setting up an ID.me account in advance can also be helpful. Access to IRS online tools is increasingly tied to identity verification, and having this in place can save time if an issue arises. I suggest using our guide to opening up an ID.me account.

It is also wise to plan for longer refund timelines. Digital does not automatically mean faster for international taxpayers. Avoid relying on refunds to meet near-term cash needs when possible.

Finally, and maybe most importantly, maintain clear records of filings and confirmations. Keep copies of returns, proof of submission, and documentation showing what banking information was provided. 

Modernization Is Necessary, but International Execution Still Matters

There is little doubt that the IRS needs to modernize its money movement. Paper checks belong to a different era, and the shift toward electronic payments is inevitable.

At the same time, the international taxpayer experience highlights the gap between policy intent and operational reality. Other U.S. agencies, such as Social Security, successfully send funds to individuals living abroad regularly. Until the IRS builds comparable systems for cross-border payments, Americans overseas should expect to navigate workarounds and delays.

The new guidance is a step in the right direction, but it is likely going to get worse before it gets better. For now, preparation, realistic expectations, and patience remain essential for Americans living abroad who interact with the U.S. tax system. For further guidance, contact our team.