What’s Your Risk of Exposure for Unclaimed Property in State Audits?

Often referred to as “abandoned property,” “unclaimed funds,” or “escheat,” unclaimed property refers to property that is abandoned or remains unclaimed or uncollected by its rightful owner. The policy rationale for these laws was to protect owners of (generally intangible) property by providing a governmental mechanism to reunite the owners with assets they might otherwise have “lost” or forgotten. Unclaimed property can include uncashed checks, unapplied accounts receivable credit balances, “lost” stock shares, and many other types of intangible property. After the expiration of a dormancy period, the holder of the unclaimed property must turn it over to the state.

The states have realized that unclaimed property audits offers an opportunity to enhance revenues without raising taxes.  Recent trends suggest a revenue-generating approach to the enforcement of states’ unclaimed property laws. For instance some states hire contract auditors who are paid based on a percentage of the property the state receives, which encourages the auditors to be overly aggressive.  Also these auditors can use estimation techniques to assess a liability against a business with bad records and because there is no record of the rightful owner, the state will keep the property.

The dynamic and uncertain nature of unclaimed property enforcement and administration makes it difficult for businesses to anticipate their compliance obligations. In this regard, state unclaimed property laws have become somewhat of a moving target. The state tax experts at KatzAbosch are familiar with the unique aspects of unclaimed property and can provide your business with certainty. We can help by reviewing your records to determine your compliance with the law and your risk of exposure in state audits.

We would be happy to meet with you and discuss your state tax exposure and ways to mitigate your audit risk.

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