Help your members with direct deposit of federal payments

TIP:  In yesterday’s Compliance Courier, The League informed you that President Trump signed an executive order calling on the federal government to phase out the use of paper checks and switch to electronic payments by Sept. 30, 2025. The change would apply to all sorts of federal payments and direct deposits, including tax refunds, Social Security, and various federal benefits. 

As the Courier pointed out, the administration has promised “A comprehensive public awareness campaign will be launched to inform Federal payment recipients of the shift to electronic options and offer guidance on setting up digital payments.”
 
In the meantime, we thought it would help to offer tips credit unions can use to help members who hear about this order and want to sign up for direct deposit sooner rather than later. So, in today’s Courier, we’ll explain how you can help members learn more about the benefits of direct deposit and even help them enroll. 

Go Direct resources

The federal Go Direct website offers resources, forms, instructions, and tools to help anyone enroll in direct deposit for their government benefits and payments.
 
The site includes a “financial institution toolkit,” with newsletters, statement messages, social media information, and a fact sheet that your credit union can use to help educate members. 

Green Book guidance

The Green Book is a comprehensive guide for financial institutions that receive ACH payments from and send payments (i.e. collections) to the federal government. To help members enroll, refer to Chapter 1: Enrollment. It explains the enrollment methods for each payment type.

• Members can enroll online. 
• They can also enroll by phone via the U.S. Treasury Electronic Payment Solution Center, (877) 874-6347, Monday through Friday, from 8 a.m. to 6 p.m. Central time. The Center’s call volumes are usually high between the first and seventh of each month. For faster service, they suggest having account information on hand and calling after the seventh of the month. 

  According to the Center “Financial institution representatives can also assist their recipients who wish to enroll by phone. However, when doing so, the benefit recipient – or their representative – must be present when the phone call is made. U.S. Treasury Electronic Payment Solutions Center personnel will ask to speak to the recipient or their representative and obtain approval for the 3rd party banking representative to provide their enrollment information. Financial institutions that elect to capture enrollment information on paper or through other means and process after hours or in a back-office environment may not use U.S. Treasury Electronic Payment Solutions Center telephone enrollment on behalf of their customer.” 
   

• Members can also enroll by mail. A resident of the United States (or a U.S. territory), can download, print, and complete the FS Form 1200 to enroll in direct deposit. 
  They should mail the completed form to:

  Go Direct Processing Center
  U.S. Department of the Treasury
  P.O. Box 650527
  Dallas TX 75265-0527

  When witnesses are used, they should sign to the right of the mark “X” and print the word “Witness” above their signature.

  A person appointed as a power-of-attorney cannot sign the FS Form 1200 for the payee. The form can only be signed by the designated recipient or a representative payee. Questions about this should be directed to the appropriate federal agency. 

Whichever method a member uses to enroll, they will need their credit union account information. Credit unions should make sure that members know where to find their routing and account number information on their checks:
 

Important information for new direct deposit recipients

• That the recipient will continue to receive checks or deposits at their current payment address of record until the direct deposit enrollment is processed; 
• About how the recipient can verify receipt of a direct deposit payment; 
• That the recipient should notify the federal agency of any address changes after direct deposit begins, since important information about the payment will be sent to the individual’s home address; 
• About the importance of notifying both the federal agency and the credit union if the recipient or beneficiary dies or becomes legally incapacitated (i.e., is legally declared to be unable to manage his/her affairs properly); 
• That if the recipient changes financial institutions, the old account should not be closed until direct deposit begins into the new account. Make sure the recipient understands that changing financial institutions requires filling out a new direct deposit enrollment. 

What to do if direct deposit does not begin

1. Ask recipient if the enrollment authorization has been revoked. If yes, no further action is required. If no, and direct deposit is still desired, go to Step 2.
2. Make a copy of the completed enrollment form from the credit union’s file copy. Note: Verify that all the information on the form is correct.
3. Send a copy of the form and a letter stating that the recipient still wants to receive direct deposit to the federal agency that authorizes the payment.
4. Remind recipient(s) that checks will continue to be sent to their home address of record until direct deposit begins. 

Reminders about IRS tax refunds

• An income tax refund enrollment is not a permanent election. The taxpayer must opt for it each year and provide current account information. 
• If the credit union cannot properly post an IRS tax refund, the payment must be returned. Notifications of change cannot be used to correct any information on an IRS tax refund since it is not a permanent election. 
• If the Direct Deposit IRS tax refund cannot be posted and is returned, the taxpayer will receive a check in place of a Direct Deposit payment. 
• The credit union must post the direct deposit payment to the account indicated on the ACH record. If the funds are posted to a valid account that turns out to be incorrect, the financial institution is not liable to the government for the return of the funds. If the taxpayer or the taxpayer’s agent gave incorrect account information, neither the U.S. Treasury’s Bureau of the Fiscal Service nor the IRS will assist the taxpayer with recovering the funds. The taxpayer is free to pursue civil action. If, however, the IRS made the error, it will make the taxpayer whole.