If your business is incorporated in Delaware or does business in the state, you may be required to file annual unclaimed property reports and remit abandoned and/or unclaimed property to the state.
Property such as dormant bank accounts, uncashed A/P and payroll checks, refunds, customer overpayments and gift certificates are among the most common types of property that become unclaimed and reportable to a state after a typical three- to five-year dormancy period. Types of reportable unclaimed property and their associated holding periods vary by state.
A significant liability related to unclaimed property may exist in Delaware for companies that are required under audit to report unclaimed property back to 1981. However, in 2012, Delaware introduced a voluntary disclosure program for unclaimed property that dramatically reduces the look-back period. Additionally, new guidelines were passed in 2013 that clarified program benefits and added others. Holders who participate in the program can take advantage of the following benefits:
- Reduction of the reporting period by 15 years (from 1981 to 1996) if the voluntary disclosure agreement (VDA) application is received prior to June 30, 2013 and by 12 years (from 1981 to 1993) if the application is received after June 30, 2013 but before June 30, 2014;
- Waiver of all associated interest and penalties;
- Elimination of the risk of audit for periods through the execution of the VDA agreement.
- A more collaborative and efficient VDA process, providing greater predictability and stability relative to timing and procedures;
- Ability for those who previously participated in a VDA to participate for any periods not covered by the prior agreement; and
- Completion of the review within nine months.
Now may be the time for your company to report its unclaimed property before Delaware comes to audit you. Remember, applications filed by June 30, 2013 afford unclaimed property holders the best opportunity of reducing potential liabilities.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.