10 Best Practices for Unclaimed Property Compliance.

AuthorMoloian, Michelle

The Expert: Michelle Moloian

Unclaimed property compliance reporting requirements may seem simple to some tax practitioners, but the lack of proper historical documentation can cause problems during an audit.

Question: How can companies ensure they are in compliance with unclaimed property reporting requirements?

Answer: On the surface, unclaimed property (UP) compliance reporting seems straightforward. Companies often believe they are in compliance and protected from audit risk, but upon closer inspection many companies find they lack the required historical documentation to verify their compliance practices when they come under audit. To help ensure that your company is truly in compliance, we encourage you to benchmark your policies, communication, and monitoring protocols against this list of ten best practices for UP compliance.

  1. Know Your Audit Risk

    There has been an increase in the number of audit firms working on behalf of all states. Unfortunately, more audit firms mean more audits. Today's reality is that UP is a source of significant revenue for many states, and they are targeting companies like yours. Sensitize your team to be on the lookout for audit letters, invitations to participate in voluntary disclosure programs, and other state UP notices.

  2. Assign Responsibility for UP Compliance

    The vice president of tax, the CFO, the controller, internal legal counsel, and others often oversee high-level risk issues, disclosures, accruals, and compliance. Therefore, it is important to get their involvement in UP. Secondary responsibility commonly falls to the tax teams, since they have infrastructure in place to address multistate reporting. Make sure to designate an escheat coordinator to work with the various departments that may generate potential UP, including, but not limited to, accounts payable, accounts receivable, payroll, and potentially marketing, human resources, and risk management.

  3. Identify "Hidden" UP

    Most companies understand that unresolved liabilities such as uncashed checks, unredeemed gift cards, and customer credit balances can result in UP; however, other not-so-common areas need to be considered. Keep an eye out for liabilities assumed in an acquisition, self-insured third-party benefit plans, small-dollar write-off accounts, mineral interests, and more. Audit firms are experts at finding "hidden" unreported areas of exposure, so this step is critical.

    For a comprehensive list of potential UP, visit the...

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