Unclaimed property typically includes intangible personal property that remains unclaimed for a certain length of time (generally a period of around five years) by its rightful owner. Such property can include un-cashed payroll checks, dividends, gift certificates, credit balances in accounts receivable, vendor payments, retirement accounts, security deposits, suspense accounts, etc.
Many businesses unknowingly treat unclaimed property as an additional windfall source of revenue. Unfortunately, businesses are not legally allowed to convert unclaimed property on their books to income. Instead, they must report and remit such amounts to the appropriate states after the property has been abandoned or lies dormant for a prescribed period of time.
If the business does not report and remit these amounts and the state discovers these unreported and unremitted amounts, the unclaimed property effectively becomes a 100% tax, with penalties and interest, of course. In many cases, there is no statute of limitations when a return was never filed.
All too often, FGMK's SALT specialists see businesses assessed significant liabilities due to inadequate record keeping and sloppy accounting such as the use of vague "miscellaneous" or "other" income accounts in the general ledger as a catch-all for unclaimed property or leaving no "track marks" behind when reissuing an outstanding check so that the new check can be easily traced to the un-cashed one.
Here is a tip from our FGMK SALT specialists, "Before recording a forfeited customer deposit as revenue, ensure that the contract is explicit and the customer is aware that the deposit is being retained for storage, restocking, costs incurred to date, or other liquidating damages".
Listed below are some of the other unclaimed property (escheat) areas FGMK's SALT specialists can help you with:
- Resolve competing state enforcement
- Planning/audit defense
- Preparation of reports
- Voluntary disclosure
- Developing and maintaining processes and procedures for tracking and reporting
- Determine abandonment and dormancy periods