Set Up Direct Deposit in QuickBooks With these Easy Steps

QuickBooks offers a direct deposit feature for paying your employees. Direct deposit is a convenient and efficient method of paying employees and contractors, which is made even easier with QuickBooks.You can also opt for the automatic payroll option for your regular employees, ensuring they receive payments at regular intervals. If you already use QuickBooks payroll service, you can switch to another bank account to set up QuickBooks direct deposit. Set up direct deposit in QuickBooks is straightforward and can be done quickly by someone new to the software.

This blog covers the complete process of setting up and utilizing QuickBooks direct deposit in detail, from configuring direct deposit for employees and contractors to resolving typical issues and confirming payments. 

Before setting up Points to consider

Here are a few key points about direct deposit:

1. Risk analysis after initial setup may take up to 3 days.
2. Double-check all account numbers and information for accuracy to avoid delays or payment issues.
3. Start direct deposit setup the day after issuing paper checks to avoid pending status during the next payroll cycle.
4. Direct deposit setup and verification typically take up to a week.
5. The Principal Officer owns the bank account used for direct deposit.
6. Email communications regarding direct deposit will be sent to the Primary admin. In contrast, ID verification and bank account verification emails will be sent to both the Principal Officer and the Primary admin.

Let’s Setup Direct Deposit in QuickBooks Desktop

Sometimes, QuickBooks users encounter QuickBooks error 40001 when trying to activate direct deposit. Here are the steps to enable direct deposit.

Step 1: Configure direct deposit

1. Click on the Settings icon, then choose Payroll settings.
2. Navigate to Bank Accounts.
3. Fill out the necessary fields for your Business, Principal Officer, and Bank account.
4. Click Save.

Step 2: Confirm a direct deposit test transaction

Verifying the direct deposit test transactions is essential after the initial setup. Two small debits, each less than $1.00 (CAD), will be made to your account as a test within 2 - 3 business days. To confirm these amounts:

1. Click on the Settings icon, then go to Payroll settings.
2. Next to Bank accounts, click the edit icon, then select Verify your account. This option becomes available 24 - 48 hours after entering bank account information.
3. In the boxes, enter the amounts of the two test transactions (less than $1.00 each). Now, enter the cents only, without any dollar sign (e.g., 47 for $0.47).
4. Click Verify.

Once verification is successful, you're prepared to configure employee setups

If you do not observe these transactions within three business days after entering direct deposit information into your Payroll settings, follow these steps to initiate the test transaction again:

1. Click on the Settings icon, then go to Payroll settings.
2. Next to Bank accounts, click the edit icon, then choose Verify test transaction.
3. To reset the test transaction, enter $0.01 in the boxes below and click verify three times. This will fail the test transaction and allow you to add the banking information again.
4. Return to Payroll Settings and click Edit next to the Bank Account field.
5. Re-enter the correct bank account information.
6. Click Continue to save changes.

We trust that you found this information helpful and that it addressed any concerns when you set up direct deposit in QuickBooks. This process involves enrolling in the direct deposit service, verifying your bank account, and entering employee bank details, ensuring seamless and timely payroll management for your business.

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