Chapter 7

Direct Deposit

Direct deposit is available for individual income tax returns that are e-filed by an approved tax preparer or an approved online service provider.  Direct deposit is available only for the original refund and is not available to taxpayers filing a paper return.

The Federal/State cooperative e-file program does not allow RALs (Refund Anticipation Loan) on the North Carolina State refund.

Direct deposit refunds are electronically transferred to a taxpayer’s financial institution into a checking or savings account.  A financial institution for the purposes of direct deposit of tax refunds is defined as a state or national bank, credit union, savings and loan association or mutual savings bank within the United States.  Refunds may not be deposited into a credit card account

Taxpayers may elect the following options for receipt or designation of their overpayment:

1. Direct deposit into a bank account
2. Receipt of a check
3. Crediting the overpayment as an estimated tax payment for the next tax year
4. Contribution to the NC Nongame and Endangered Wildlife Fund

A check will be issued if any of the following conditions exist.

1. The refund cannot be direct deposited based upon the information provided (i.e. invalid routing number or invalid account number)
2. Rejection by the financial institution
3. Discretion of the Department of Revenue based upon a review of the tax return

Checks will be made payable to all taxpayers stated on the return and will be mailed to the address stated on the return.

Acknowledgment

The North Carolina acknowledgment process will only indicate receipt of the e-filed return.  The acknowledgment system will not indicate proof that the direct deposit election was honored.

The Eligibility Requirements

• The return must be e-filed by an approved ERO or online service provider.

• The return must be for the current filing tax year.

• The taxpayer must show the ERO acceptable proof-of-account from the financial institution that the taxpayer designates.  Acceptable proof-of-account is a check, a statement or a form generated by the financial institution. A deposit slip is not an acceptable proof-of-account because it may contain internal routing numbers that are not part of the account number.  The proof-of-account document must contain the following preprinted information:
  • Account name and address -- name and address on the account as it appears on the records at the financial institution
  • Name of financial institution
  • Account number -- maximum 17 numeric characters
  • Routing Transit Number (RTN) – must be 9 numeric characters
• The account designated to receive the direct deposit must be in the taxpayer’s name
• IRS Publication 1345, Handbook for Authorized IRS e-file Providers of Individual Income Tax Returns, sets forth detailed eligibility requirements, responsibilities, and instructions governing tax preparers, transmitters, and EROs who offer taxpayers the option of direct deposit.  Those same rules, policies, and procedures apply when offering direct deposit on the State return.

The Responsibilities of an ERO

• Advise taxpayers of the option to receive their refund by direct deposit and ensure that the taxpayer is knowledgeable of all the general information regarding direct deposit.
• Accept direct deposit election to any eligible financial institution designated by the taxpayer.
• Ensure that taxpayers electing direct deposit meet the eligibility requirements listed under “Eligibility Requirements.”
• Verify the direct deposit information is correct.
• Must never charge a separate fee for direct deposit.
• Inform the taxpayer that after an e-filed return has been accepted for processing and once the return is accepted by the IRS and by North Carolina:
  • the direct deposit election cannot be rescinded,
  • the account number cannot be changed, and
  • the routing transit number cannot be changed.
• Crosscheck bank account information with repeat clients.  Some software maintains the previous year’s data and reuses it unless it is changed.

Frequently Asked Questions

Can the State refund and the federal refund be deposited into a different account?
Yes, the State refund can be deposited into a different account than the federal refund.  A taxpayer may elect to have the State refund direct deposited even though the federal return may be a tax due or vice versa.  In addition, the federal and state refunds can be deposited into the same account (checking or savings).

Will a notice be sent to the ERO or to the taxpayer on the status of the direct deposit?
No, a notice will not be sent to the ERO or to the taxpayer to confirm that the refund was deposited into an account.   Also, the Department cannot guarantee a specific date that a refund will be deposited.  Taxpayers may check the status of their refund by calling 1-877-252-4052.

Can a refund be deposited into more than one account?
No, a refund can only be deposited into one account.

Can the same bank account be used more than once?
There are no limitations on the number of deposits that can be made to one bank account.  However, the Department reserves the right to issue a check in the event of an erroneous account or routing transit number, closed accounts, bank mergers, or for any other reason at the discretion of the Department.

Requirements for Direct Deposit

Direct Deposit is for electronically filed returns only.  Direct Deposit is only available for the original refund.  The Federal/State cooperative e-file program does not allow RALs (Refund Anticipation Loan) on the North Carolina State refund.  Refunds may not be deposited into a credit card account.

Note:  The Department requires the Routing Transit Number, Depositor Account Number, and Type of Account screen to be entered twice to ensure accuracy. 

Name of Financial Institution
A financial institution for the purposes of direct deposit of tax refunds is defined as a state or national bank (including the District of Columbia and political subdivisions of the 50 states), credit union, savings and loan association or mutual savings bank within the United States and established primarily for personal, family or household purposes. This field represents the name of the bank or financial institution to which the refund will be deposited.

Routing Transit Number
The routing transit number (RTN) is a valid number for the financial institution where the taxpayer’s account is held.  The RTN must contain nine (9) numeric characters.  The RTN must be present on the Financial Organization Master File (FOMF) and the financial institution must process Electronic Funds Transfer (EFT).  The RTN must be keyed as a nine-digit number containing no spaces or dashes.  Leave this field blank, no zeroes, if there is no direct deposit election. 

Depositor Account Number
The depositor account number or taxpayer bank account number must be alphanumeric (i.e. only alpha characters, numeric characters, and hyphens).  The depositor account number must be entered exactly as it appears on the check or proof of account, eliminating spaces.  The maximum number of allowable characters is 17 positions and cannot equal all zeroes or all blanks.  The depositor account number must be left-justified with trailing blanks if less than 17 positions.  This field cannot contain leading or embedded spaces.  Leave this field blank, no zeroes, if there is no direct deposit election.

Type of Account
This field consists of alpha characters and is a required field.  The field indicates if the account is a checking or savings account.  The values are “X” or blank.  If the routing transit number is significant, then the checking account indicator or savings account indicator must equal “X.”   Both fields cannot equal “X.”

When direct deposit information is present, the following fields must be significant: Routing Transit Number (RTN), Checking Account Indicator or Savings Account Indicator, and Depositor Account Number.