This blog was last updated on June 26, 2021
When performing accounting functions, understanding how our actions will affect the company downstream is important. For some functions, the consequences are obvious, but for unclaimed property reporting, consequences of inaccurate reporting can be uncertain at best. Is it really a big deal if you are reporting everything to your company’s state of incorporation instead of the state of the owner’s last known address? Really, what will happen to your company if you do not report correctly?
The consequences may be nothing. Your company could be unaffected by improper unclaimed property reporting if you are not caught. However, the imposition of a multi-year audit or the expense of penalties and fines are real and present consequences that may be levied by the state for your company’s non-compliance. In some cases, these penalties and fines could add up to two and a half times the amount originally owed to the state for unclaimed property!
For some companies, the assurance of compliance and the peace of mind that their officers experience is worth investing in a software solution or service to manage the entire process. For others, the unclaimed property reporting responsibility is just one more responsibility an overworked controller has to cover. Whatever the resources allocated to unclaimed property reporting, they are sure to be better than the alternate consequences of noncompliance.
The cost-benefit analysis of unclaimed property reporting will, of course, vary by organization. Some companies may only have a small amount of unclaimed property, or may not have to report to states with negative filing requirements. The actions, or lack of action, that may trigger an audit also vary by state. However, one thing remains constant: the cost of the consequences by not reporting outweigh any benefit of not reporting. Without fear-mongering, for most companies, noncompliance with their unclaimed property reporting is just not worth the risk.
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Get in touch with a Sovos unclaimed property expert to learn more about managing your unclaimed property compliance processes.
