File unclaimed property reports to reduce the likelihood of costly penalties

This alert was updated as of September 2020.

Is your business holding unclaimed property such as employee payroll checks or vendor payables?

If so, it’s a good time to evaluate whether you’re responsible for filing unclaimed property reports.

Many states impose a Nov. 1 deadline for filing and remitting property to the appropriate states. Failing to meet the deadline can lead to filing complications and costly penalties.

Background

Each state has an unclaimed property program that requires businesses to report, or escheat, any unclaimed or abandoned property they hold.

Types of unclaimed property include the following:

• Commissions
• Dormant savings or checking accounts
• Life insurance policies and annuities
• Royalties
• Unused gift certificates
• Other miscellaneous outstanding checks

These types of property generally become unclaimed and subject to state reporting requirements after a specified period, known as a dormancy period, which generally lasts from two to five years.

Report unclaimed property

Businesses holding unclaimed property may be required to make reasonable efforts, known as due diligence, to contact the owner and return the property. If a business can’t find the owner, the property must be remitted to its respective state, which may be any of the following:

• State of the last known address of the owner
• Property holder’s state of domicile
• State where the transaction took place

Determining the proper state can be complicated. It involves analyzing a cascading set of rules, and penalties may apply if a business doesn’t properly follow the rules or meet correct reporting conditions.

Penalties

States often impose penalties on businesses that willfully fail to report or deliver unclaimed property. Here are a few examples of the penalties: