While abandoned or unclaimed property is not a tax, it has become a significant source of revenue for many states. The information age has also allowed state governments to more effectively locate companies that have never filed an unclaimed property report. State inquiries can lead to an audit and an audit can quickly evolve into a costly matter for your business.
Generally, all states have some type of unclaimed property laws that declare money, property or other assets to be abandoned after a period of inactivity, usually three to five years. Should the company fail to locate the property owner within this time period, the company is required to turn the property over to a particular state’s abandoned property department.
Common Abandoned Property Types
A few common forms of abandoned property consist of, but are not limited to:
- uncashed payroll checks;
- unused gift cards or certificates;
- product and service refunds; and
- outstanding checks to vendors.
Non-compliance with state abandoned or unclaimed property laws can be costly when considering that state assessments can cover a significant number of years and penalty and interest additions. Abandoned or unclaimed property audits can reveal significant and material liabilities that may impact reporting in accordance with Sarbanes-Oxley Section 404.
Schneider Downs’ State and Local Tax professionals can help you traverse the complex state abandoned or unclaimed property laws and procedures to limit or eliminate potential liabilities.