KeepUP™ Blog

Unclaimed property compliance is a year-round activity.  But so is unclaimed property recovery. 

Amounts owed to you (unclaimed property) can go unclaimed for a myriad of reasons.  A company could have moved locations.  They may have changed their process or contact point for payment receipt.  A check could literally be lost in the mail.  Once those items are lost and go unreconciled, they turn into unclaimed property. Unclaimed property can be funds held by a state/jurisdiction resulting from statutory escheat requirements or they can be outstanding balances held by a government entity (that may never be escheated) until you or your organization come forward. 

State unclaimed property departments are holding billions of dollars, some of which can be found by going to state websites.  Other government entities, from municipalities to federal agencies, are also holding significant amounts owed to companies. However, this information is often not made available via public websites and can be difficult to obtain.

Deadlines Could Be Imposed for Recovery

Each year in the United States, billions of dollars are escheated to the states. Nationwide, the total value of escheated properties in state custody may well exceed $40- $50 billion. However, even more unclaimed property sits dormant at government agencies, counties, municipalities, courts and other local agencies that will never be reported to the states as unclaimed property. 

Before an item is reported to the states as unclaimed property, outreach in the form of statutorily mandated due diligence letters must be mailed to the last known address of the owner.  However, property held by counties, municipalities, or courts may not be subject to state unclaimed property laws. In these instances, no communication to the owner is required. However, companies may receive letters indicating they are the owners of funds being held by these entities (an “Asset Recovery” letter.) Asset Recovery letters are typically sent by third party firms attempting to help your organization recover monies you did not know you were owed.   

So how does an organization distinguish between a statutorily required due diligence letter and an asset recovery letter?

It is not well known, but government agencies of all sizes, from municipalities to even the federal level, are holding significant refunds owed to companies. These are not escheated funds held in a state unclaimed property database, but rather financial liabilities owed directly to companies by a government agency. This information is often not made available via public websites and can be difficult to obtain.

Most of these unclaimed funds relate to outstanding tax refunds caused by duplicate payments, over-payments, and reassessments. By our estimate, there are billions of dollars of outstanding tax refunds being held by government agencies.

Why Is This a Problem?

A common reason these refunds go unclaimed is due to relationships with third parties. While companies trust third parties to ensure complete, timely, and accurate tax filings, any related refunds that could be obtained are often just an afterthought. Below are three common scenarios which lead to tax refunds going unclaimed:

1. You may not believe you are owed a refund because it never was sent to your company. Often tax refunds are mailed to the third party that assisted with the filing. They may not have been expecting the refund, did not know what it related to, or simply forgot to forward it along to the company that was rightfully owed the funds.