Direct Deposit Authorization Form

A direct deposit authorization form is a legal document letting an employee authorize their employer’s payroll representative to deposit funds directly into their account. It eliminates the need for paper checks that may be lost or stolen.

Table of Contents

• What Is a Direct Deposit Authorization?
• How Does Direct Deposit Work?
• What to Include on a Direct Deposit Authorization Form
• How to Add an Employee to Your Payroll
• Direct Deposit Authorization Sample
• Frequently Asked Questions

What Is a Direct Deposit Authorization?

A direct deposit authorization is a document an employee fills out to permit the direct deposit of their paycheck into their bank account by their employer.

Once an employee provides their information via an official form, an employer typically uses the Automated Clearing House (ACH) system to deposit employees’ wages into their bank accounts.

If an individual doesn’t submit this authorization to their employer, the employer will have no choice but to continue issuing paper checks.

How Does Direct Deposit Work?

To get direct deposit set up for your employees:

1. You can begin by collecting their personal and financial information during the onboarding process.
2. Then, the employer determines the employees’ paydays. Some employers offer weekly paydays, while others make their paydays on the 15th and the last day of each month.
3. The employer will send payroll instructions to its bank one or more business days before payday arrives.
4. The employer’s bank will pass the information through the ACH, and this operator will organize the ACH records and deliver all the instructions to the proper bank for every employee’s paycheck.
5. Once each financial institution obtains the ACH instructions, they will process the transactions and deliver the money accordingly.

What to Include on a Direct Deposit Authorization Form

Here are some essential elements to include on this form:

• Company details: List the company’s name, physical address, phone number, fax number, and email.
• Employee details: Provide the individual’s full name, home address, phone number, fax number, email, social security number (SSN), and employee identification number.
• Bank account information: Write the employee’s bank’s name, address, and contact details. Include the routing number and account number and whether the account is a checking or savings account.
• Authorization statement: Include a statement authorizing the employer to deposit all owed payments into the listed accounts. Specify that they have permission to correct any mistakes in their deposits.
• Employee signature and date: Leave space for the employee’s signature and date of signing.
• Space for an attached physical check: Most employers ask employees to attach a voided check, but it might be optional.

Once employees provide all this information, they can submit the completed form to their employer’s payroll representative or accounting department. If the form has a voided check attached, the employer will confirm the accuracy of the employee’s financial information.

How to Add an Employee to Your Payroll

Adding a new employee to your business’s payroll system is a relatively straightforward process, but it does require you to keep a few essential things in mind.

Step 1 – Obtain an Employer Identification Number

If you don’t already have an Employer Identification Number (EIN), the first step is to obtain one. You can complete Form SS-4 or apply online through the Internal Revenue Service.

Your EIN will act like a social security number for your business. It’s free to apply for as long as you establish your business within one of the 50 U.S. states or territories.

Online filing will give you an EIN within 20 minutes. If you fill out the form and mail it to the Department of Treasury, you can expect to get your EIN within 10 to 15 business days.

Step 2 – Obtain Forms from the Employee

The next step is to obtain forms from the employee to ensure they’re eligible to work in the U.S.

Some of these forms include:

• W-4: A W-4 form tells the employer how much they should withhold from each individual’s paycheck.
• Form I-9: Form I-9 confirms the employee’s status to work in the U.S.

Step 3 – Distribute Employment Forms

Once you confirm an employee’s eligibility, you should distribute employment forms as part of the onboarding process. For example, you can distribute an onboarding letter, an employment contract, and an employee handbook.

At this point, you can also give them the direct deposit authorization form to let them set up direct deposit. Have them provide their information and submit it back to you.

Step 4 – Add the Employee to Your Payroll Schedule

Add the individual to your payroll schedule, ensuring you account for deductions and withholdings. It’s possible to keep track of this information yourself, but you may also use a payroll provider like ADP or Gusto.

A payroll provider will eliminate the need to process payroll manually, which is helpful if you have a lot of employees.

Some of the deductions you must ensure to account for include:

• Government deductions: Government deductions include local income taxes, state taxes, Medicare, Social Security, and federal income tax.
• Other deductions: Other deductions include charitable donations, retirement plan contributions, and health insurance premiums.

Step 5 – File Form 941 with the IRS Every Quarter

You should file Form 941 with the Internal Revenue Service each quarter:

• 1st Quarter: January 1st to March 30th is due May 10th.
• 2nd Quarter: April 1st to June 30th is due August 10th.
• 3rd Quarter: July 1st to September 30th is due November 10th.
• 4th Quarter: October 1st to December 31st is due February 10th.

This form contains the following information:

• Total number of employees
• Medicare and Social Security withholding amounts
• Insurance claims
• Leave or sick pay
• Any other revenue details

Direct Deposit Authorization Sample

Below, you can download a direct deposit authorization form in PDF or Word:

DOWNLOAD PDF

DOWNLOAD MS WORD

Frequently Asked Questions