Despite the hectic times finance departments are in right now, fall unclaimed property deadlines are still coming up fast.
Monitoring and timely filing unclaimed property can pose challenges for Finance any year. But this year, there are additional challenges due to the pandemic, like digital process changes or more dispersed teams.
And perhaps the biggest challenge of all: Since the coronavirus pandemic resulted in an economic downturn, states have seen a major decrease in tax revenue. Now, they’re looking to find ways to make that up.
In turn, you can expect an increase in unclaimed property audit activity, since that presents a viable way for states to make up for current tax deficiencies, say the experts at True Partners Consulting.
To prepare for a successful unclaimed property filing season and guarantee compliance in the event of an audit, go over these four best practices with your finance team:
1. Check every unturned stone
Because states want to boost revenue, you can assume they’re going to be looking in every nook, cranny and “hidden” area that could potentially create unclaimed property. So, be sure your team assesses every place where it could lie.
For example, do you have any returned ACH remittances? Has your company gone through acquisitions, where it could’ve obtained unreported unclaimed property?
Thoroughly reviewing all accounts and records now will give your company assurance later.
2. Use an unclaimed property calendar
An internal compliance calendar can help your team stay on track and hit deadlines. Of course, you’ll first want to see that it’s updated with any relevant state regulatory changes.
Next, make sure your timeline still fits with your current COVID-19 work environment, suggests True Partners Consulting. Is info or data being shared or sent differently now? Do you expect delays? What extensions do states have available?
3. Verify unclaimed property filing rules
If using a third-party provider or software, it should spell out how to file. But if your company files directly with states, your team will have to put in a little more work.
On your compliance calendar, they should note the form and delivery requirements for submitting reports and remittances for each state or jurisdiction.
And take note: In light of the pandemic, some states have moved to more digital processes. For example, certain states that previously accepted paper reports are now mandating digital (uploaded or emailed) reports. Other states are looking to move solely to e-payment methods.
It’d be smart for your team to double-check states’ current submission rules, so they don’t submit incorrectly or get surprised by last-minute changes.
4. Finish strong with solid records
Even if your company covers all its unclaimed property liabilities and meets every filing deadline, it could still face trouble if records aren’t properly retained.
The prime time to conduct your record retention process is as a final step of your annual filing, says True Partners Consulting. (Some examples of docs to retain are bank statements, cashed checks, returned due diligence letters, messages related to liability resolution, copies of filed reports, proof of remittances and A/R aging reports.)
Another consideration: Because of the recent shift to remote work, many companies have undergone system changes. If you have, be sure archived systems are still available to your team to maintain and access older records. If older unclaimed property records aren’t available, auditors may have to estimate your exposure for those periods. Being able to access and provide far-back records keeps your company safe from that.