Many business owners are unaware of their obligation to perform due diligence regarding uncashed checks.
Background: What is unclaimed property?
Unclaimed property is a certain obligation a company holds for another business or person that can include checking and saving accounts, certificates of deposit, over payments, insurance checks, and payroll checks. It can also include utility refunds, money orders, uncashed checks, dividends, stocks bonds, contents of safe deposit boxes and more.
Rules and regulations for employers
Understanding reporting and forfeiture responsibility not only keeps a business compliant with state regulations – it can also serve as an incentive to follow up on uncashed checks. As a business owner, you have to identify uncleared checks on a systematic time basis. Follow up by contacting the payee to determine if the check was lost or destroyed, and reissuing the payment if necessary, is a best practice for all businesses to avoid noncompliance. Performing this due diligence falls on the business owner.
How to identify unclaimed property
For many businesses, unclaimed property is typically in the form of uncashed checks issued to employees or vendors for payment of services, or uncashed refund checks issued to customers. In the State of Illinois, for example, the dormancy period for vendor or customer checks is three years and one year for employee payroll checks. States have defined “lookback” periods as well.
In Illinois, financial institutions and other insurance/governmental agencies have an annual filing deadline of November 1, 2023, while all other businesses must file by May 1. As May quickly approaches, Illinois does offer an extension period. However, a written request must be submitted at least 15 business days before the due date of the report, which includes the requested extension time-period and a reason why additional time is needed.
Best practices
Agencies regularly conduct examinations, and as with any examination, they can be time-consuming, disruptive and lead to penalties. Our recommendation is to file your report annually, even when you have no property to report (known as a “negative” report and is actually now required by Illinois). Make sure the report includes your remittance balance and that you provided complete owner information/details.
States have different rules regarding when, how and what property must be reported and turned over. You can click here to see state rules and those from the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands.
If your business is believed to have significant unclaimed property exposure in other states, many do offer voluntary disclosure programs to eliminate penalties and even reduce the lookback period that will need to be reported.
If you have any questions or would like our assistance in determining your reporting requirements or report preparation, please contact us.
