With all the work your A/P department puts into issuing timely payments, it can be frustrating to find out there’s unclaimed property floating around out there.
Unclaimed property laws vary widely from state to state, and can be very confusing. Yet compliance is crucial since issues with reports can lead to fines.
Congratulations if you didn’t get a notice from Delaware, which has a March 1 reporting deadline. However, some fast-approaching and firm deadlines for unclaimed property reporting include:
Come up with a plan
Unclaimed property can happen to just about any company, so it’s wise to have policies and procedures that include regularly performing self-audits/risk assessments to locate missed or underreported property and tracking and documenting all unclaimed property efforts.
Because uncashed paychecks and outstanding commissions, bonuses and workers’ compensation can all count as unclaimed property, both A/P and Payroll may have to share unclaimed property duties. With that in mind, you might want to consider appointing an unclaimed property administrator who assigns specific tasks to Finance team members, trains staffers on unclaimed property procedures and ensures reporting deadlines are met.
In addition, this point person can be in charge of tracking changes in state regulations or new types of property to manage.
Unclaimed property notices
Notification about possible escheatment of property or payments typically comes in one of two ways: an annual compliance reminder or a notice of examination.
In the case of the compliance reminder, it’s important to pay close attention to any changes in the reporting process referenced in the letter, including:
- Law changes (filing dates, dormancy periods, etc.)
- How and where to submit a report
- Due-diligence requirements
- Remittance requirements and applicable payment type threshold
- Negative reporting requirements
- Tangible property requirements
- Securities transfer instructions, and
- Filing extension procedures.
On the other hand, a notice of examination means you’re being audited. In some cases, you might be given some leeway to conduct a formal self-audit.
Among the things auditors may be looking for:
- Missed report filings
- Inconsistencies in amounts reported
- Irregularities in property types reported, or
- Your filing history compared to other companies in your industry.
States often have specific criteria and identification techniques, which may require you to use a third-party auditor’s software. Other crucial pieces of information in notices of examination that you need to prepare for include:
- Whether it’s a state official or a third-party auditor conducting the examination (third-party auditors tend to be more stringent)
- The scope of the audit, including entities, types of property and year(s)
- Whether penalties and interest may be imposed, and
- What, if any, action you need to take.