Not every taxpayer went along with the IRS’s move away from paper refund checks. More than 300,000 of them, 300,537 to be exact, got permission to keep receiving a check in the mail instead of a direct deposit, according to a new watchdog report. The number, current as of March 30, 2026, shows how large the carve-out has grown as the agency works through a federal mandate to pay refunds electronically.
What the exception count leaves out: TIGTA’s count of paper-check exceptions says nothing about whether that refund shows up on time, the gap the refund-trace steps in The IRS Refund Recovery Kit close. See the refund-trace steps for a paper refund →
The Exception Process at the IRS
The IRS began requiring most taxpayers to receive refunds electronically as part of a broader federal shift away from paper checks, but it built a process for people who cannot easily make that switch. The Treasury Inspector General for Tax Administration’s September 14 snapshot report puts the number of exceptions granted at 300,537 as of March 30, 2026, meaning that many taxpayers are still authorized to receive a paper check going forward rather than a direct deposit. The report was signed by Nancy A. LaManna, TIGTA’s Deputy Inspector General for Inspections and Evaluations, with the underlying audit work led by the office’s Inspections and Evaluations division.
Who Got Approved to Keep a Paper Check
TIGTA’s breakdown shows the exceptions are not evenly spread across a single reason. The categories include taxpayers with religious objections to electronic banking, such as Amish and Mennonite filers; people who are incarcerated; taxpayers living outside the country; people with disabilities that make online identity verification difficult; and people with limited access to technology or a bank branch. The IRS built the exception process specifically around these groups rather than offering a general opt-out, which is part of why the count, while large, still represents a small share of the roughly 150 million individual returns the agency processes each filing season.
The exception is also not permanent by default in every case. A taxpayer whose exception rests on incarceration or overseas residence can see that status change from one filing season to the next, which means the 300,537 figure describes a snapshot rather than a fixed list of people who will always receive a paper check going forward. TIGTA’s report does not say how often the IRS re-checks an exception once it is granted, which is part of what makes the number worth tracking again once the agency’s transition moves past its current, still-incomplete stage.
The Numbers Behind 300,537
Most of the exceptions did not come from a taxpayer picking up the phone. TIGTA found that 261,816 of them, 87% of the total, were granted automatically using existing IRS records, mainly for incarcerated and international taxpayers the agency could already identify without a new application. Another 14,373 exceptions, 5% of the total, came through telephone requests, and 12,203, or 4%, came through a taxpayer’s Individual Online Account. The remaining 12,145 exceptions, also 4% of the total, were granted to people whose identity verification failed, a category that overlaps with much of the call volume TIGTA documented on a separate line for the same rollout.
A Watchdog’s Snapshot, Not a Final Count
TIGTA describes its report as a snapshot of the IRS’s paperless transition through July 2026, not a final accounting of who ends up with a paper check permanently. The agency’s own justification for moving away from paper in the first place rests on cost and risk: the Social Security Administration’s parallel transition, required by the same Executive Order 14247 that took effect September 30, 2025, cites a paper check that costs $3.07 to print and is 16 times more likely to be lost, stolen, altered or returned undeliverable than an electronic payment. Every exception granted keeps a taxpayer inside that higher-risk category rather than moving them out of it, which is presumably why TIGTA is tracking the number at all.
What a Fraud Watchdog Says About Paper Refunds
The exception count also lands against a backdrop of broader refund-fraud concerns at the IRS. A separate Government Accountability Office report published September 25 estimated annual tax fraud losses at $116 billion to $304 billion and found the IRS had stopped $88 billion in invalid refunds from 2018 through 2024, while still lacking a formal antifraud strategy or a designated antifraud office. A paper check sent to an exception-holder is not inherently fraudulent, but it sits inside the same slower, harder-to-track payment channel the GAO’s report flagged as a weak point in the system.
Neither report ties a specific fraud case to the exception process itself, and TIGTA’s snapshot frames the 300,537 figure as a measure of the paperless rollout’s progress rather than a fraud finding. Still, the two reports were published within weeks of each other and describe the same underlying tension: paper checks cost more, move slower and carry more risk than direct deposit, yet a meaningful population of taxpayers cannot use direct deposit for reasons the IRS has judged legitimate enough to grant an exception.
Getting Back to Paper Isn’t the End of the Process
An exception lets a taxpayer keep receiving a paper refund check. TIGTA’s own numbers show most of those approvals ran through existing IRS records rather than a live review of each case, and a paper check still travels by mail, arriving later than direct deposit and carrying the same loss and fraud risk the switch to electronic payments was meant to reduce.
The IRS Refund Recovery Kit lays out a refund status tracker spreadsheet and the 3-year refund deadline, both built around a refund that has to be tracked by mail rather than confirmed instantly online.
Track a mailed refund’s timeline inside The IRS Refund Recovery Kit.
This article was produced with the help of AI and reviewed by a human editor before publication.
