Setting up direct deposit for employees streamlines payroll processing and ensures faster, more secure payments. Whether you’re using QuickBooks Online Payroll or QuickBooks Desktop Payroll, enabling direct deposit is a simple process that saves time and improves accuracy. This comprehensive guide walks you through every step of the setup process, so you can start paying your employees through automated bank transfers with confidence.
Why Use Direct Deposit for Payroll?
Direct deposit offers a range of benefits for both employers and employees:
- Faster payments — Employees receive their funds instantly on payday.
- Secure transactions — No risk of lost or stolen checks.
- Paperless processing — Reduces administrative workload.
- Improved employee satisfaction — Convenience leads to happier staff.
Before getting started, ensure your employees’ accounts are U.S.-based and can receive ACH (Automated Clearing House) transactions.
Steps to Set Up Direct Deposit for Employees in QuickBooks
Step 1: Set Up Company Payroll for Direct Deposit
To enable direct deposit, you must first activate it within your company’s payroll settings.
For QuickBooks Online Payroll:
- Open QuickBooks and go to the Payroll menu.
- Follow the guided setup to connect your business bank account.
- Verify your account through a micro-deposit process, which may take 1–2 business days.
For QuickBooks Desktop Payroll:
- Navigate to the Employees menu and choose Send Payroll Data.
- Click on Activate Direct Deposit, then complete the application process.
- Submit company and bank account information for verification.
Once your company is approved for direct deposit, you’re ready to begin adding employees.
Step 2: Collect Direct Deposit Authorization Forms
Before enrolling an employee in direct deposit, you must collect their banking details and obtain written consent.
What to Include:
- A completed and signed Direct Deposit Authorization Form.
- A voided check from the employee’s checking or savings account (used to verify bank details).
Note: Deposit slips are not accepted as they may contain inaccurate routing numbers.
QuickBooks Online Users:
- Employees can enter their bank details directly via the QuickBooks Workforce portal, reducing admin workload.
- If collecting details manually:
- Go to Taxes > Payroll Tax > Filings > Employee Setup.
- Locate the Authorization for Direct Deposit section and select Bank Verification.
QuickBooks Desktop Users:
- Gather the employee’s bank name, routing number, and account number manually or from their voided check.
- The voided check remains on file for your records—no need to upload it to QuickBooks.
Step 3: Add Employees to Direct Deposit
Once you’ve set up your company and collected authorization, it’s time to enter your employees’ banking details into QuickBooks.
For QuickBooks Online Payroll:
- Navigate to Payroll, then select Employees.
- Click on the employee’s name.
- Under Payment Method, click Start or Edit.
- Choose Direct Deposit from the dropdown menu.
- Select a deposit type:
- One bank account
- Two bank accounts (split by percentage or dollar amount)
- Deposit with remaining balance as a check
- Enter routing and account numbers.
- Click Save.
You can also access the authorization form from this screen if the employee hasn’t signed it yet.
For QuickBooks Desktop Payroll:
- Go to Employees > Employee Center.
- Select the employee and open their profile.
- Click the Payroll Info tab, then choose Direct Deposit.
- Check Use Direct Deposit for [Employee’s Name].
- Choose whether to deposit into one or two accounts.
- Enter the financial institution information:
- Bank Name
- Routing Number
- Account Number
- Account Type (checking or savings)
- If splitting between two accounts, specify the fixed amount or percentage for the first account—the remainder goes to the second.
- Select OK to save.
- Enter your Direct Deposit PIN when prompted.
Important: If an employee’s account is categorized as a money market account, advise them to list it as checking or savings. QuickBooks Desktop does not support money market classifications.
Bonus: Set Up Direct Deposit for Contractors
If you need to pay independent contractors via direct deposit:
- Follow the same process as you would for employees.
- Ensure contractors have filled out a Contractor Direct Deposit Authorization Form.
- Add them under the Contractors section in QuickBooks.
Read More: How to Set up Direct Deposit for Contractors in QuickBooks?
Final Tips for Successful Direct Deposit Setup
- Double-check banking details — Incorrect information leads to payment failures.
- Store authorization forms securely — Keep physical or digital copies for compliance.
- Monitor processing timelines — Direct deposit payments may take 1–2 business days to process, depending on your bank.
By following these steps, you’ll enjoy a smoother payroll process and offer your team a more reliable way to get paid.
Conclusion: Direct Deposit Simplifies Payroll
Implementing direct deposit in QuickBooks is a smart move for any business looking to streamline payroll operations. Not only does it eliminate the hassle of paper checks, but it also boosts efficiency and improves employee satisfaction. Whether you’re using QuickBooks Online or Desktop Payroll, setting up direct deposit is quick and straightforward with the right information and tools.
