Understanding the Changing Landscape of Found Money

Understanding the Changing Landscape of Found Money

March 10 was the deadline for businesses to file an Abandoned Property Law Annual Report. Not filing potentially increases risk of an audit, but so does filing. What’s a business to do?

Healthcare organizations may be particularly vulnerable, considering the complexities surrounding costs, who is responsible payment, and more. Whether it’s a payment to a vendor that went out of business or a duplicative payment from a patient and insurance company for the same claim, the state where the property’s owner resides may have dibs on this and other types of found money including payroll checks, direct deposits, customer credit balances, and more.

The New York State Fiscal Year 2021-2022 Annual Report of the Office of Unclaimed Funds (OUF) explains the OUF is responsible for implementing the state’s Abandoned Property Law by ensuring abandoned funds are remitted to the state; conducting audits to recover funds; increasing public awareness of the funds; and protecting the rights of owners until funds are returned.

During FY 2021-2022, the OUF collected $980 million. The Voluntary Compliance Program resulted in $8 million being found. Audit collections totaled $93 million. $404 million was returned to rightful owners. $560 million was transferred to the state’s General Fund (the state holds over $17.5 billion in unclaimed funds dating back to 1943. The Hudson Valley had the third highest amount of funds paid (following NYC and Long Island), totaling $33 million.

As reported by TaxExecutive.org, “The importance of knowing and understanding unclaimed property laws has grown in recent years, because unclaimed property is now a significant revenue source for certain states…As a result, states now actively enforce these laws to capture unclaimed property in audits, voluntary disclosure programs, and litigation or through legislation.”

Audits can result in significant assessments, interest, and penalties. Voluntary compliance programs and agreements give companies a way to avoid interest and penalties in most states. That sounds good until you consider if your company doesn’t have records for the look back period, it must use the state’s mandated methodology to estimate liability. What’s more, you’ll still need agreement from a state appointed administrator or audit firm. Even after all of that, your firm can still be referred for an audit.  In recent years, more “holders” of unfound money have turned to litigation and increasingly found support.

If your company needs help understanding the laws, how they’re enforced, and your options for responding, RBT CPAs tax professionals can help. With state and auditing firms’ outreach efforts growing to uncover additional sources of potential revenue, should you receive any type of communication asking for self-disclosure or the like, be sure to give your RBT CPAs contact a call.

NOTE: RBT CPAs is providing this content for informational purposes only. It should not be construed as advice or direction. Should you need advice or direction, it’s in your best interest to talk to a tax professional (like those at RBT CPAs) or to contact your legal counsel.