The Wisconsin Unclaimed Property Voluntary Disclosure Agreement (VDA) Program closes on February 28, 2023
All states, including Wisconsin, have laws that require businesses to turn over certain property that belongs to others but have gone unclaimed to the state. This property is referred to as “unclaimed property” and is mostly limited to intangible personal property and bank safe deposit boxes.
Common types of property that are subject to being turned over to the state (this is referred to as “escheating”) are customer credit balances and various forms of uncashed checks – including payroll checks, vendor payments, customer refunds and stock dividend payments. Voided checks are also assumed to be unclaimed property if your business is unable to document the resolution of the underlying liability due to a reissuance of the check or otherwise being unable to show that the underlying liability was settled.
The Wisconsin Unclaimed Property VDA program allows for the abatement of all penalties while also limiting the lookback period to five years. However, once February 28 has passed, a 15% late payment penalty and $150 late filing fee are imposed – and the Department can issue unclaimed property assessments going back seven years from the original due date of the unclaimed property report. Note that, in addition, the Wisconsin Department of Revenue (WDOR) is beginning to transition into substantially increasing its unclaimed property audit activity.
Does Wisconsin have any Significant Unclaimed Property Exemptions?
Wisconsin provides for two very significant unclaimed property exemptions: there is no requirement to report unclaimed property generated between two businesses (the business-to-business exemption) or report gift cards, stored-value cards, or loyalty cards.
When does Unclaimed Property Need to be Escheated?
For unclaimed property to be escheated, it must first go through a period where there was no contact from the property owner. This time is referred to as the “dormancy period.” This period for most Wisconsin unclaimed property is five years; however, payroll and commission checks should be escheated after just one year.
What is the General Unclaimed Property Reporting Process to Follow?
The reporting process typically goes by first identifying the unclaimed property that reached its dormancy period during the last reporting period. For Wisconsin, this runs from July 1 of the first year through June 30 of the following year. Then, a notice is sent to the property owner using the last known available address. The unclaimed property will be turned over to Wisconsin by November 1 unless the owner responds to the notice. When the property owner’s address is not known, the property is subject to escheatment if the business was incorporated or organized in Wisconsin.
How do you Identify Unclaimed Property?
Identify unclaimed property by reviewing your business’s bank statements for uncashed or voided checks to determine if they have passed the dormancy period. Businesses should also review customer accounts, income accounts and other miscellaneous accounts to identify any credit balances. This is often where unclaimed property gets mistakenly converted when an owner fails to claim it in a reasonable period of time. As Wisconsin can lookback seven years in an audit – and most property has a five-year dormancy period – Wisconsin could end up auditing records from 12 years ago.
What are the Eligibility Requirements to Participate?
According to the state, to participate in the program, your business:
- Must have unclaimed property to report from any of the five most recent reporting periods
- Must have not been audited for unclaimed property since July 1, 2016
- Must have not received a notice of an upcoming unclaimed property audit
- Does not have a balance due on its business unclaimed property holder account
How do you Participate in the Wisconsin VDA Program?
To participate, visit the unclaimed property home page and select the Voluntary Disclosure Agreement Application under holder’s section.
- Proceed by completing the step-by-step process that requests identifying information for the business
- Note the confirmation number upon submission
- Regularly (if not daily) review your business’s “My Tax Account” for receipt of the executed agreement
Remember to submit your application no later than February 28, 2023. Once the application request is submitted, the WDOR will process your request. If approved, it will issue a signed unclaimed property VDA.
Once you receive confirmation, you need to:
- Issue a notice to the reportable unclaimed property owners within 30 days (not applicable for property under $50) to determine their next steps. Owners must be given 30 days to respond before turning the property over to Wisconsin. (Find a sample letter here.)
- Report and pay the unclaimed property within 120 days to the Department, excluding the property whose owners responded to their notice. Report the unclaimed property electronically using the Wisconsin 2020 Unclaimed Property Holder Report.
- File Wisconsin unclaimed property reports for the next four accounting periods – the first one being the accounting period ended June 30 for which the annual report will be due by November 1.
What About Other States?
As mentioned, all states have unclaimed property reporting requirements. Fortunately, most states offer VDA programs to businesses to help bring them into compliance. States that may be of particular concern, due to historically being aggressive with unclaimed property audits or are likely to see increasing audit activity in the unclaimed property area, are California, Delaware and Illinois.
For more information, please visit the WDOR’s FAQs. If you have additional questions or would like to discuss this further, please contact our team below: