Did you know that approximately one in 10 people have unclaimed property (UP) in their name? Research conducted by Sovos found that there is upwards of $77 billion in UP assets currently in the United States. As states crack down to close the estimated $600 billion tax gap, UP is a prime target for states to recover revenue through compliance enforcement. We’ve highlighted the intricacies of UP and how businesses can alleviate the stress of the UP compliance process.
What is Unclaimed Property?
According to the National Association of Unclaimed Property Administrators, unclaimed or “abandoned” property refers to property or accounts held by financial institutions or companies—in which there has been no customer-generated activity (or contact with the owner) or the property due to an owner remains outstanding for one year or longer. Companies are responsible for reporting UP across all states in which they do business.
Examples of Unclaimed Property
Intangible UP is the most common form, but there are also cases of tangible UP. A few of the common forms of UP include:
- Checking or savings accounts
- Uncashed dividends or payroll checks
- Individual Retirement Accounts (IRAs)
- Unredeemed money orders or gift certificates (in some states)
- Customer overpayments
- Contents of safe deposit
- Insurance payments or refunds and life insurance policies
- Cryptocurrency (in some states)
UP is governed and enforced at the state level with no two states having the exact same UP laws. These laws can evolve or be regularly updated, requiring companies to monitor legislative changes. Failure to follow UP laws can land business owners in hot water with costly fines and even jail time. However, organizations are not always current on their UP requirements. It has been estimated by states and audit firms that less than 20% of organizations are in full compliance with UP laws. Companies across numerous industries often don’t know they have an UP responsibility until they find themselves in hot water by way of an audit or receiving a compliance invitation letter from a state(s).
Unclaimed property is a compliance concern often put on the backburner, but it is now being brought to light. Governments are eager to close the growing tax gap by embracing new technology and enforcement methods to guarantee they collect what is legally required. Ensuring your organization is in full compliance with UP regulations is critical. Working with a trusted partner like Sovos ensures a fool proof strategy that streamlines the UP compliance process.
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