If your clients have old payroll checks or old payments to vendors that have never cleared the checking account and your client can’t find the employee or vendor, at some point in time they need to turn that money over the State of California. I think there are similar laws in most states.
I’m guessing lots of your clients may not have realized that. I’ll make another guess that they aren’t alone.
Just read a background article on the issue, which is referred to as escheat. I learned there is a 12% annual penalty on any amounts that should have been turned over to the state but were not.
Since I’m making lots of guesses, here’s another one. As hungry as the state is for tax revenue, we may someday see auditors from the State Controller’s Office start looking for money from businesses and charities that haven’t escheated funds. Twelve percent over three or four years could add up to some decent return on an auditor’s time.
You remember that old question about what to do with those old outstanding checks that haven’t cleared?
Writing them off doesn’t work as the answer anymore. Those outstanding checks belong to somebody else.
The correct answer is look again for the payee and then after the proper time runs (3 years according to the article), you should start the specified two-step process and eventually get the money to the Controller’s Office.
A word to the wise is sufficient. Remember that 12% per year penalty. That is some expensive money.
Following article appeared in the California Board of Accountancy’s newsletter Update #77 and is reprinted with permission of the California State Controller’s Office and the California Board of Accountancy.
(For ease of reading, this will not be posted with quotes around the whole article.)
CPAS CAN HELP CLIENTS MEET UNCLAIMED PROPERTY REPORTING REQUIREMENTS
Written by the State Controller’s Office for use by the California Board of Accountancy
Do you have clients who are holding unclaimed property? Perhaps it is a returned security deposit or refund check. Or, it could be stocks, bonds, safe deposit box contents, or other property. With $7.6 billion in unclaimed property received by the State Controller’s Office (SCO) and an estimated 28.6 million owner accounts available to be claimed, chances are, you may have clients who need your guidance in this area.
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For businesses in California, did you know you must turn over unclaimed property to the State Controller’s Office?Read More »
