WASHINGTON, D.C. — The Internal Revenue Service announced two major updates last week, extending tax relief for farmers and ranchers impacted by drought and launching a plan to phase out paper refund checks for individual taxpayers.
On Sept. 22, the IRS issued guidance allowing farmers and ranchers in 49 states, the District of Columbia, and other drought-affected regions more time to replace livestock sold because of extreme weather. Under the notice, producers can defer taxes on capital gains from the forced sales of livestock used for draft, dairy, or breeding purposes. Typically, replacement must occur within two years, but the relief extends that period to four years, with the option for additional extensions if drought persists.
The IRS said the measure helps farmers whose replacement periods were set to expire at the end of 2025, giving them until the close of their next tax year after the first drought-free year to reinvest in livestock. Eligibility is based on federal drought designations determined by the National Drought Mitigation Center.
The next day, Sept. 23, the IRS announced it will begin phasing out paper tax refund checks for individual taxpayers starting Sept. 30, 2025, as part of a transition to electronic payments mandated by Executive Order 14247.
Agency officials said the move is aimed at protecting taxpayers, noting paper checks are over 16 times more likely to be lost, stolen, or altered than electronic refunds. Direct deposit also speeds access, with most payments issued in less than 21 days for electronic filers compared to six weeks or longer for mailed checks.
The IRS emphasized that taxpayers will continue filing returns as usual. Refunds will default to direct deposit or other secure electronic methods, with options such as prepaid debit cards or digital wallets for those without bank accounts. During the 2025 filing season, 93% of the 93.5 million refunds issued were delivered electronically.
Detailed guidance for 2025 tax returns will be released before the 2026 filing season. Updates will be posted at IRS.gov/modernpayments.
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