If your company has a checking account, then your company likely holds unclaimed property. All companies, no matter how large or small, hold funds (that belong to others) in a variety of forms. Types of unclaimed property include uncashed vendor payments and payroll checks, aged credit balances in accounts receivable and dormant accounts including deposit accounts, trust accounts and stock portfolios.
If the payees do not claim these checks or if credit balances are not applied to specific invoices or accounts within a certain time period, then the funds represented by those checks become unclaimed property and are subject to the relevant law.
In concept, the reporting and remitting of unclaimed property seems simple enough. However, once a company begins looking at the specific requirements for the different states, the situation becomes a complicated morass of reporting deadlines, formats and remitting requirements that vary by state and industry type.
The reporting and remitting confusion is especially evident in view of the fact that most companies now deal with vendors, employees and clients in multiple states.
Pursuant to unclaimed property laws, unclaimed funds must be reported and remitted to the state of the payee’s last known address. If there is no last known address for a payee, those funds must be reported and remitted to your company’s state of incorporation.
The company reporting and remitting unclaimed property must use the correct reporting forms, (including the proper verification from an officer) submit at the correct time and remit in the format required by the various states.
Reporting and remitting deadlines are different depending on the state. Most states provide different reporting deadlines for companies from different industry classifications. In most states, for instance, reporting deadlines for insurance companies are different than reporting deadlines for other types of companies. There are at least seven different reporting deadlines applicable to insurance companies throughout the various states. Similarly, there are different reporting deadlines for other types of companies such as banking organizations, general business organizations or stock brokers. The reporting and remitting confusion continues considering the variety of reporting formats required for the different states.
Each state has its own reporting forms, including cover pages and certification requirements. These forms are generally available for download from the Web site of the state’s unclaimed property administrator.
Finally, the method of remitting the unclaimed property is different depending upon which state your company is remitting unclaimed property to and the value of that property.
Some states require unclaimed property to be remitted via wire transfer. Other states require an ACH submission. Still others require funds to be remitted via a certified or cashier’s check unless over a certain amount, in which case, an alternative method of remitting is required.
Most states impose fines for failure to report and remit unclaimed property in a timely manner, failure to use the proper form or failure to remit using the proper method. The fines range from a few hundred dollars to tens of thousands of dollars.
If your company is trying to come into compliance with the unclaimed property laws of the various states, then some basic background research will be necessary to avoid these fines.
If you are assigned this task, you should first determine the different states to which you are required to report. Then, as to each state, you should determine the reporting and remitting deadlines based on your company’s industry type. Next, you must utilize the correct reporting and certification forms for the various states. Finally, you should determine the correct method for remitting the funds to the different states.
If you do not want to be the person responsible for incurring an unclaimed property reporting or remitting fine, then do your research. The fines are easy to avoid if you know the different requirements before you begin the unclaimed property compliance process.
