Unclaimed Property

1
Unclaimed Property

• Mindy Harada
• OS Payroll Consulting
• mindy.harada_at_ospayroll.com
• Cynthia Vance

2
California Statistics

• There is currently 5.1 billion in unclaimed
  property being held by the state controllers
  office
• The 5.1 billion belongs to 8.2 million
  individuals and businesses.

3
What is Unclaimed Property

• Unclaimed property laws are one of the original
  consumer protection programs
• It is not a Tax
• The state benevolently steps into the shoes of
  the lost owner and takes ownership of the
  property until the rightful owner is found
• Yeah, right

4
What is Unclaimed Property?

• Tangible Property
• Inheritances, Bank Accounts
• Intangible Property
• Uncashed Payroll Checks
• Uncashed Vendor Checks
• Deposit Accounts
• Credit balances in A/R

5
When is Property Considered Abandoned?

• Definition of Abandoned Property varies from
  state-to-state.
• California considers property abandoned after one
  year from becoming payable
• Dormancy Period Also varies from state-to-state

6
What Companies are Affected by Unclaimed Property?

• Every company has unclaimed property.
• High audit risk companies include the following
• Manufacturers
• Financial organizations
• Utility providers
• Retailers
• Food processors
• Health care

7
Characteristics of High Risk Companies

• High employee turn-over.
• High visibility in the market place.
• Large amount of vendors.
• Large A/R credit balances.
• Customer deposits.
• Patient credits.

8
Unclaimed Property Audits

• Unclaimed Property Audits are a hot topic for
  states for the following reasons
• No statute of limitations.
• Audits result in large assessments annual
  exposure is cumulative.
• Audit projections and extrapolations.
• States frequently use contract third-party
  auditors on a contingent fee basis.

9
What Variations Can You Expect in an Unclaimed
Property Audit

• Auditor Projections
• May not take revenue growth or corporate changes
  into account.
• Audit Basis
• Reliance on Miscellaneous Income and General
  Ledger rather than source data.
• Penalties and Interest.

10
Unclaimed Property Compliance

• Record Retention Requirements
• Notification Requirements (due diligence)
• If the employer has in its records an address for
  the owner of wages valued at 50 or more, the
  employer shall make reasonable efforts to notify
  the employee by mail that the wages will escheat
  to the state if they remain unclaimed.
• The notice shall be mailed not less than 6 nor
  more than 12 mths before the time when the
  owners property becomes reportable to the state
• Reporting Requirements (annually).

11
California Specifics

• Reports due by November 1 for each year ending as
  of June 30 to the State Controller.
• Report requires identification of the property
  and the former employee and the dates when the
  property became payable to the employee.

12
California Specifics

• Property valued at less than 50 may be reported
  in the aggregate
• Property reported as unclaimed is delivered to
  the State Controller with the report.
• The Controller may at reasonable times and with
  notice examine the records of any employer .

13
California Specifics

• Penalties
• Any employer that willfully fails to render any
  report or perform other required duties shall be
  fined 100 for each day a report is withheld or
  duty not performed but not more than 10,000
• Fines of 5,000 to 50,000 can also be assessed
  against employers that refuse to deliver the
  wages to the state, and interest can be charged
  for late payment

14
Questions?