Failing to account for unclaimed property can cost businesses millions of dollars.
As more states dramatically increase their efforts to enforce unclaimed property requirements due to widespread noncompliance, it is crucial to track and report your organization’s unclaimed property to states to avoid costly penalties to your company – both monetarily and reputational.
Better understand what constitutes unclaimed property
Learn how to properly account for unclaimed property
Comprehend how unclaimed property can impact your business
Understand best practices for properly filing unclaimed property
Utilize the right solutions and services to mitigate unclaimed property risk
According to the National Association of Unclaimed Property Administrators (NAUPA), “Unclaimed Property refers to accounts in financial institutions and companies that have had no activity generated or contact with the owner for one year or longer.” It is also generally defined as a fixed and certain interest in intangible property that is held, issued or owed in the course of a holder’s business that has gone unclaimed for a specific period of time (the dormancy period) by the rightful owner. At their most basic level, unclaimed property laws are intended to be consumer protection statutes with the goal of reuniting owners with their property.
Remember, the rightful owner of the property is your customer/client. It is in your business’ best interest to establish solid business practices that include avoiding the property going unclaimed in the first place and/or taking the steps required by law to make reclaiming property as simple as possible for owners.
Do you know what your business should be doing to ensure it’s compliant with the various laws and regulations regarding unclaimed property? It isn’t easy, especially if your company has multiple property types such as checks, credits or customer accounts that have the potential to become unclaimed property in multiple states.
Most businesses likely consider outstanding checks issued from primary operating accounts the only real source of unclaimed property exposure. However, focusing only on that scenario means you could be overlooking other sources that may hold potential exposure. Do you know what other common things could be unclaimed property?
Sovos research found that that there is upwards of $77 billion in unclaimed property assets currently in the United States. As states are cracking down to close the estimated $600 billion tax gap, unclaimed property is a prime target for states to recoup revenue through compliance enforcement. Our annual report reviews everything from unclaimed property basics to best practices for addressing state compliance initiatives.
Unclaimed property fraud can occur at the holder and state levels and can be perpetrated by employees or individuals posing as the rightful owners to falsely claim assets. In some extreme cases, unclaimed property fraud could be a combination of internal and external bad actors, with a business’ employee working with someone on the outside of the company. How can organizations recognize the signs of unclaimed property fraud?
Ensuring unclaimed property compliance is critical for businesses of all sizes. Failure to report and remit unclaimed property could lead to high financial penalties.
As a general guideline, most organizations have an unclaimed property obligation to one or more states. The type of unclaimed property you may have will be dependent on your industry and/or your solution/services offerings.
The most common unclaimed property types include checking or savings accounts, uncashed checks, overpayments, security deposits and royalty payments.
If your organization has never filed unclaimed property before, you should develop business-specific policies and procedures to keep your organization in compliance.
No. There are currently 55 reporting jurisdictions, and they all have different reporting requirements and guidelines.