As a business owner, you may receive important letters regarding compliance requirements for your company. Among these, unclaimed property notices are significant and should be handled carefully to avoid legal issues. This blog provides an overview of unclaimed property, the different types of notices, and best practices for handling them.
What is Unclaimed Property?
Unclaimed property refers to assets that belong to individuals but have been left unclaimed for a certain period. Items can include uncashed payroll checks, employee reimbursements for out-of-pocket expenses, and undeposited payments to vendors and independent contractors.
Types of Unclaimed Property Notices:
States typically follow the Uniform Unclaimed Property Act, which grants them the authority to examine a company’s records to ensure compliance. Companies receive three types of unclaimed property notices:
- Annual Compliance Reminders:
States send these letters to remind holders of unclaimed property to file reports before the annual reporting deadlines. The letters may include updates on filing dates, requirements, remittance procedures, and other relevant information. It is crucial to pay attention to any changes mentioned in the letter.
- Notices of Examination:
States have the authority to audit a company’s books and records to check for compliance with unclaimed property regulations. They use specific criteria and software to identify potential targets for examination. Companies should carefully review these notices, which provide details on the examination scope, penalties, and necessary actions.
- Self-Audit (Amnesty Program Invitation):
Some states offer companies the chance to conduct a self-review to verify compliance before a full examination. This opportunity should be taken seriously, as the response may impact whether a full examination will be conducted. Delaware, a state actively enforcing unclaimed property compliance, often sends invitations for Voluntary Disclosure Agreements and other self-review programs.
Maintaining Compliance:
To minimize liabilities and the risk of audits, establish a comprehensive unclaimed property compliance program in your company. This program should include policies and procedures to identify, track, and document unclaimed property efforts. Regular self-audits or risk assessments can help detect and address any missed or underreported property early on.
You may also want to switch to direct deposit or ACH transactions as funds are posted directly in the account of the payee and will avoid the issue of lost/forgotten checks not being deposited timely.
If you have questions about your specific state, how unclaimed property is handled, and where to mail payments, see https://unclaimed.org/state-reporting/
Understanding and properly handling unclaimed property notices is essential. By staying informed about reporting requirements, responding to examination notices, and considering self-review opportunities, you can maintain compliance and minimize potential risks associated with unclaimed property.
How to handle state unclaimed property notices – Journal of Accountancy
