When it comes to reporting unclaimed property, things, unfortunately, are rarely as simple as they may seem. With constantly evolving rules and regulations, it is hard to determine exactly what one must do to complete the process successfully. This confusion, unfortunately, is only compounded by the fact that each state has different procedures holders must take to report unclaimed property. Therefore, businesses that have reported unclaimed property dozens of times may even be doing so incorrectly.
Holders can strive to avoid reporting unclaimed property incorrectly by informing themselves of the most common errors that would lead them to do so. By becoming aware of these typical mistakes, they can actively work to avoid and mitigate them, ensuring they report all unclaimed property correctly the first time.
Here are 10 unclaimed property reporting errors all businesses need to know:
- Reporting unclaimed property only to the company’s state of incorporation
While this is a common practice, the chances of someone locating and claiming property from a state they never resided in, are diminished. Furthermore, businesses cannot rely on their state of incorporation to participate in reciprocity and send the unclaimed property to the state it was supposed to be reported to. - Failing to report all applicable property types that the company’s particular industry may generate
One example of this mistake would be a bank failing to report certificates of deposit. On a broader note, another example would be any business forgetting to report accounts receivable. When organizations neglect to report unclaimed property specific to their industries, it acts as a warning signal to the states. This makes those states question their unclaimed property reporting compliance. - Using the incorrect dormancy period
When businesses make this error, they risk overreporting or underreporting the property. Unfortunately, this leads them to become non-compliant with the reporting process and leaves them susceptible to undergoing a compliance review or audit. - Sending due diligence letters all at once instead of in the timeframe mandated by each state’s law
Before businesses can formally report unclaimed property, they must send due diligence letters. Oftentimes, they will make the error of sending all due diligence letters to the rightful owners of the unclaimed property at once, regardless of the states they live in. However, not all states have the same reporting deadline. Therefore, while most states require holders of unclaimed property to send these letters 60 to 120 days prior to their reporting deadline, the timeframe the due diligence letters need to be sent within could occur at different times for each state. It is important businesses do not make this error as the due diligence requirement exists to give the owners ample time to come forward and claim their property before it is turned over to the state. - Failing to include state-mandated language in due diligence letters
When sending these letters, businesses must ensure they Include state-specific language and disclosure requirements. This required
language is important as it gives the owner information about their unclaimed property as well as how to claim it. Generally, the letter outlines what type of property they could be entitled to, who to contact to claim the property, and what will happen if they fail to contact the holder of the property within 30 days. - Missing the state reporting deadline
Making this error leaves the business with no choice but to file the unclaimed property late. When this occurs, some states will charge penalties and/or interest on these late reports and late payments. However, many states are willing to grant businesses a reporting extension if they are unable to report the unclaimed property on time. Doing so requires organizations to contact the state and provide a reason for needing the extension. - Manually calculating the dormancy period
When businesses choose to calculate this time period by hand, they risk doing so incorrectly. This means they may shorten or extend the dormancy period for a piece of unclaimed property. Once again, this could lead them to send due diligence letters or report the property too soon or too late and risk becoming non-compliant. - Misinterpreting unclaimed property laws or failing to keep up with changing laws
Whether businesses do not fully understand the unclaimed property laws of each state they are reporting to or do not inform themselves of any updates to these laws from year to year, they risk incorrectly reporting the unclaimed property they are holding. Unfortunately, businesses reporting property to multiple states are even more likely to make this error as they must understand more laws and be mindful of more updates to them. - Failing to properly train staff and neglecting to put unclaimed property policies and procedures in place
Businesses also commonly make mistakes when reporting unclaimed property because they do not have enough regulations or checks and balances in place surrounding the process. Oftentimes, management neglects to oversee or delegate duties during the reporting process. This typically leaves one or a few employees to complete this confusing process with little to no direction. Unfortunately, this heightens the possibility for errors to be made and for property to be reported incorrectly. - Applying the incorrect reporting year
Making this error could lead businesses to turn over property to the state before it is truly time to do so or have it in their possession for too long. Furthermore, this could result in the state receiving more or less unclaimed property from a specific business than expected. This may act as a warning signal to that state and cause them to question that business’s unclaimed property reporting processes and practices. Unfortunately, it may also increase the likelihood that business is audited.
While this list of common errors holders make when reporting unclaimed property may feel overwhelming and endless, businesses must remember they do not have to tackle these alone. Dunbar is here to help businesses avoid making these common errors as well as much more rare and serious ones.
Our experienced consultants will work with holders to ensure any unclaimed property is reported to the right state at the right time while abiding by all rules and regulations. They strive to stay up to date on any changes to states’ unclaimed property laws and spend countless hours reviewing these laws to thoroughly understand them. Dunbar is committed to ensuring all of its clients have a successful experience reporting their unclaimed property each and every time.
Dunbar is a reputable provider of unclaimed property compliance services, offering a comprehensive suite of solutions to help organizations remain compliant with all applicable laws. With a professional team with decades of experience, Dunbar is the ideal choice for businesses seeking a reliable and knowledgeable provider for their unclaimed property compliance needs.
