On March 25, 2025, President Trump issued Executive Order 14247 (EO 14247), which mandates significant changes to how federal disbursements and payments are processed. Starting September 30, 2025, the US Department of Treasury and the IRS will cease issuing paper checks for all federal disbursements, including benefits payments, vendor payments, and tax refunds. This transition to electronic payments and disbursements if implemented as proposed may affect Americans living abroad together with foreign sellers of US real estate.
Some Key Changes Under EO 14247
- End of Paper Checks for Tax Refunds:
- As of October 1, 2025, the IRS will primarily issue tax refunds via electronic payments to U.S. bank accounts. This shift may pose challenges for foreign individuals seeking IRS refunds from real estate sales who may not have a U.S. bank account.
- Electronic Payments to the Federal Government:
- EO 14247 also requires that all payments made to the federal government be processed electronically. While the exact effective date for this requirement is unclear, many commentators believe it will also take effect on September 30, 2025.
- Compliance Plans:
- The order directs federal agencies to develop compliance plans to facilitate the transition away from paper checks. However, as of now, no such plans have been publicly released by the Treasury Department or the IRS.
The Role of Closing Agents in real estate transactions
Traditionally, closing agents have facilitated the timely payment of IRS withholding taxes on behalf of purchasers of real estate who purchase from foreign sellers. However, with the transition to electronic payments, several challenges arise:
- Delay in Payment: If buyers must establish their Electronic Federal Tax Payment System (EFTPS) accounts before making payments, this could lead to significant delays and potential penalties.
- Buyer Unfamiliarity: Many buyers may not understand their obligations as withholding agents, increasing the risk of incurring penalties.
The implementation of EO 14247 presents both challenges and opportunities for escrow companies and taxpayers alike. As the deadline approaches, understanding the nuances of electronic payments and the implications for foreign seller transactions will be vital in navigating this new landscape. Real estate attorneys serving as closing agents and counsel to Buyers purchasing from foreigners must act swiftly to adapt to these changes, ensuring they can continue to fulfill their essential role in real estate transactions while minimizing risks for buyers and sellers. The IRS is expected to issue formal guidelines for the implementation of the EO prior to the September 30, 2025, effective date.
