Posted on December 09, 2019
Unclaimed Property (also known as abandoned or escheat property) is exactly that – money or tangible assets that belong to you, but are viewed as “abandoned” because there has been no activity or contact with you by the holder for one year or longer. There are a myriad of types, but the most common for individuals are uncashed payroll checks, forgotten bank accounts, and non-refunded utility security deposits. For businesses, uncollected vendor payments and tax refunds top the list.
Every U.S. state, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, several Canadian provinces and a few other foreign countries have active unclaimed property programs in place. In the U.S. alone, there is an estimated $58 billion dollars waiting to be claimed! The process is free and relatively simple for those searching for their funds.
Searches are free and can be accomplished online through either a 3rd party website or any state’s Department of Revenue. Just enter your name or that of your company, and the jurisdiction databases will do the rest. If the results reveal an entry that contains your name, you are in luck!
On the flip side, if you or your company owe money to others, you are referred to as a “holder”. Your first step is to determine exactly which of your held items are actually escheatable. It will vary depending on the type, age, and jurisdiction. Payroll checks, for example, are normally reportable after one year, while vendors’ checks can have a 3, 5 or 7-year holding period. Depending on the state, you may be able to remit these funds sooner than the holding period requires. You do have a legal obligation to attempt to contact your payee. If your attempts are either unsuccessful or ignored, then the funds must be remitted to their respective states.
If you have never reported before and are already past your timely filing period, take the initiative and file a VDA (Voluntary Disclosure Agreement) - if the state has such a program. Most states are willing to be more lenient if you approach them first. You may be audited, but in most instances the VDA will eliminate any penalties and interest as well as reduce a state’s lookback period. Going forward, create a process to file the annual returns timely per state guidelines.
Remitting funds is rather straightforward. Due dates vary depending on the state, but the bulk fall on October 31 and November 1 annually. You will have to register with any respective states through an application process. Once that is complete, it is just a matter of filing your report and sending a check. For convenience, many states also offer the option to file and pay online. Remember that this is not a one-time process; it requires routine review and reporting with jurisdictions to stay compliant.
Businesses beware: unclaimed property has become a very lucrative area for states in their unrelenting search for revenue. Items like unreconciled bank accounts and credit balances in accounts receivable are prime auditor targets. States can reduce their holding periods – so items you thought you had time to “deal with later” suddenly become reportable. The unclaimed property reporting process is a lot to keep track of, and getting your arms around the entire realm can be overwhelming if you don’t have either the time or resources to deal with it.
Tips for the Taxpayer
Businesses need to have a solid unclaimed property process in place to determine whether they have funds that need to be escheated. Stay up-to-date with state unclaimed property reporting requirements. In an audit, the taxpayer will be responsible for unclaimed funds. Look for planning opportunities and VDA’s that might be applicable to your company. On the other side, businesses should conduct annual reviews seeking funds owed to them and escheated by others., you’d be surprised at what you could find! If your company does not have the time or expertise available to dedicate to unclaimed property reporting and review, seek a consultant with experience.
How Can We Help?
Allyn’s tax team is staffed with seasoned tax professionals experienced in all aspects of multi-state and local tax compliance and consulting for large US and global corporations. Allyn performs unclaimed property reviews and routine compliance duties regularly for businesses located throughout the US and Canada. Allyn tax professionals are well-versed in technical unclaimed property tax regulations, procedures, and practices. We use that experience to your advantage.
Allyn has the experience and wherewithal necessary to conduct a full review of your unclaimed property obligations and develop a strong process going forward. Our team will ensure that you are in complete compliance with applicable tax law while reducing your tax liability to your fair share and nothing more. While we’re at it, we can conduct a review of funds escheated by others and owed to you, turning liabilities into refunds.
It is very simple and easy for a company to engage Allyn in unclaimed property compliance and consulting. Just reach out to us, and we will only require minimal data from you to get us started. We minimize the time that you will spend on unclaimed property issues while we focus on the details and keep you apprised of the progress and findings. Further, we do it all with our recognized dedication to customer service, rated over 350% higher than current industry averages.
Contact us and we can provide a customized cost-effective solution to meet your company’s needs. For further information on Allyn tax services, please contact: firstname.lastname@example.org.
For More Information
If you are interested in learning more about this topic or other tax topics, please visit our Tax Publications under News and Events at www.allynintl.com.
Allyn Contributor: Phil Staskowski
Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North America, Europe and Asia and Allyn regional headquarters are strategically located in Fort Myers FL USA, Shanghai P.R. CHINA and Prague, CZECH REPUBLIC. For more information, log on to www.allynintl.com.