However, according to the IRS, “8 out of 10 taxpayers get their refunds by using Direct Deposit.” Taxpayers have the option to receive their tax refunds from either a physical check or using direct deposit. Since federal law requires that benefit payments be made electronically, direct deposit is the fastest and most secure option for receiving your funds. Notes on direct deposit for federal benefits (tax refunds and credits) Once the money gets transferred from your company to your bank, you see it in your account.
This all happens a couple of days before payday, so the ACH has time to sort and route the information to each employee’s bank. Direct deposit is most commonly used to transfer an employee’s salary however, it may also be used for things like tax refunds, investment dividends, retirement account payments, and government benefits like Social Security or unemployment payments.Ĭompanies send their payroll information to financial institutions, and it then gets shared with the Automated Clearing House (ACH). Direct deposit is a popular and convenient option, but you may be wondering, how does it work? For direct deposit, employers require the payee’s bank account information or a void check in order to start making deposits.
