- Every state and territory in the United States has unclaimed property reporting laws.
- Every company (holder) has a legal obligation to report unclaimed property to the state of the last known address of the property owner.
- Most holders, regardless of size or industry, have unclaimed property to report.
How do holders know if they have unclaimed property?
- Do you have any of these types of aged/old liabilities on your accounting records?
- Payments due to vendors
- Credits / Account balances owed to customers
- Wages / Compensation due to employees
- Other types of unreconciled/undischarged liabilities (insurance claims, dividend payments, etc.)
If you answered “yes” to any of these then you likely have unclaimed property to report. However, many businesses 1) write-off these liabilities or 2) just continue to carry them on their books, month-after-month. These are not recommended practices because reporting unclaimed property is the law. Non-compliance puts an organization at risk for audit where fines and/or penalties can be imposed which may have a significant financial impact to your company.
Tips To Start The Unclaimed Property Compliance Journey
- Examine Accounting Records. Examine records throughout your organization to identify all unreconciled liabilities. Here are a few functional departments which could house aged liabilities and would have knowledge of any potential unclaimed property.
- Accounts Payable
- Accounts Receivable
- Franchise Operations
- Client / Customer Operations
- Attempt to Reconcile Aged Liabilities. Have functional departments perform outreach activities in an attempt to make contact with each owner/payee and reconcile any outstanding items. You’re likely to have a higher success rate starting this process as soon as you uncover an outstanding liability. Waiting until you are statutorily required to attempt to reunite the owner with the funds (through the last contact due diligence process) will lower your chances of making contact and increase the amount of unclaimed property you need to manage and report.
- Analyze Unresolved, Remaining Liabilities. Identify what liabilities remain and work with your unclaimed property compliance expert to create a plan to bring your company into compliance with each state’s unclaimed property reporting laws to mitigate audit risk and penalty/interest charges.
Your company’s unclaimed property reporting history will determine how complex your reporting plan needs to be, but the plan should, at the least, consist of;
- Identify unclaimed property throughout the organization on a recurring, consistent basis.
- Determine when unclaimed property is due to be reported, according to state dormancy schedules.
- Execute statutory due diligence activities in an attempt to reunite unclaimed property with the rightful owner prior to reporting it to the state.
- Know when unclaimed property annual compliance reports are due, how each unclaimed property report must be submitted and how unclaimed property amounts due must be remitted.
For more information about unclaimed property reporting or for guidance creating a compliance program for your company, contact a MarketSphere Unclaimed Property Specialist’s today for a free, no risk consultation. The Knowledge Vault is also available for free educational materials.