Who Deposits Your Tax Check?

First, it goes to a lockbox.

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Millions of Americans will lick stamps, scurry to drop-boxes, and flood H&R Block in the next few days as they rush to file their federal income taxes. What exactly happens to those checks we send to the United States Treasury?

The money ends up in the Federal Reserve Bank of New York. But it makes a few pit stops on the way, depending on how the payment is made—by paper or electronically.


Taxpayers who owe money are instructed to send their tax forms and their check or money order to an Internal Revenue Service Center. If you pay by check or money order, your payment goes from the post office or service center to a “lockbox” bank—essentially the equivalent of a really expensive P.O. box. Lockbox banks are often used to process high-volume mail, such as utility payments, and are outfitted with equipment that allows for high-speed envelope opening.


The lockbox bank deposits your check into an in-house Treasury Department account. A bank official logs all of the tax payments that have cleared and eventually wires the money electronically to the Treasury General Account at the Federal Reserve Bank. The government has your cash in its main account by the next business day.


The system works differently for electronic filers. These payments are processed by the Electronic Federal Tax Payment System. Once you provide your account information to the IRS (through regular mail, the Web, or by phone), your bank-account number is sent to EFTPS, which then transfers the amount you owe from your account directly into the government’s account. (You can also sign up to make a payment directly through EFTPS). The government does not accept direct credit-card payments for taxes, but third parties offer this service for a fee.

The withholdings that your employer takes out of your paycheck most likely get paid to the Treasury electronically. Businesses that pay more than $200,000 in taxes annually must submit employee withholding taxes and other tax payments electronically. Small businesses can pay at a local financial institution by using a Federal Tax Deposit Coupon. In rare cases, these payments may be mailed. 

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Explainer thanks Gary Grippo and Melody Barrett of the Financial Management Service.