Tax Professionals Handbook

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. The North Carolina deposit is a true direct deposit, which requires a checking or savings account number and a routing transit number from the taxpayer that can show acceptable proof-of-account of their designated financial institution.

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.

Some financial institutions do not permit the deposit of a joint refund into an individual account. The NCDOR is not responsible if a direct deposit is rejected for this reason. Check or share draft accounts that are “payable through” another institution may not accept direct deposits. Taxpayers should verify the financial institution’s policy on direct deposits before filing.

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 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.

• When can a taxpayer expect to receive his/her direct deposit?   
  By electing the direct deposit method, most taxpayers can expect to receive their refund quicker than if they requested a check, usually within 4 weeks.

• 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.