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Unclaimed Property: Are You in Compliance?

Almost every business produces Unclaimed Property. If steps haven’t been taken to identify, notify, report, and remit on an annual basis – now is a good time to start. The cost of noncompliance may be steep and result in a higher risk of being audited.

What is Unclaimed Property?
Unclaimed property include the financial assets in a business’ possession that belong to another business or individual. Examples include uncashed checks (including payroll), refunds and credits, inactive bank accounts, insurance proceeds, safe deposit box contents, and utility deposits.

How Does Property Become Unclaimed?
There are many ways in which property could become unclaimed. It might be due to a terminated employee forgetting to pick up the final check, an employee or vendor change of address, or because the owner simply did not know about the property.

Reporting and Deadlines
There are five simple steps to ensure compliance:

  1. Review records regularly
  2. Make a reasonable effort to contact the Owner
  3. Prepare the report
  4. Submit the report and remit
  5. Retain records

Review Records Regularly
The easiest way to consistently identify outstanding payables is to review the bank reconciliation on a monthly basis, research the outstanding checks, and document the adjustments.

When researching, the goal is to determine the date of last contact or activity for each customer account or outstanding amount owed to a client, customer, vendor or employee. Once the research is complete, the next step is determining if the property is considered unclaimed.

Property is Unclaimed if both of the following are true:

  1. The property has been uncashed for 1-3 years
  2. There has been no contact with the Owner during the 1-3 year abandonment period
Property Categories Number of Years Dormant
Wages/Commissions 1
Utility Deposits/Refunds 1
Safe Deposit Boxes 3
Checking/Savings Accounts 3
Traveler’s Checks 15

South Dakota Unclaimed Dormancy Matrix (Excerpt)
The complete Dormancy Table is located on the Unclaimed Property Division’s website under Reporting Guidelines. However, this is only a guide. Refer to the Unclaimed Property law (SD43-41B) when reporting.

Make a Reasonable Effort to Contact the Owner
Before reporting and remittance, due diligence should be exercised in efforts made to notify and return the property to the owner. Notices are to be sent no less than 60 days prior to reporting. The requirement of due diligence only applies to amounts of $50 or more – the State does not have a minimum for the requirement to report. If these attempts do not produce any activity or claim, the property should then be reported to the State.

What to include in the notification(s):

  1. Statement/Identification of property being held.
  2. Information regarding change of address/name of the Holder (if applicable).
  3. Statement the property will be transferred to the state.
  4. Letters must be sent no less than 60 days prior to transfer.

If the Owner of the property establishes activity or claim prior to the property being remitted, the Unclaimed Property Division must be notified.

Preparing the Report
All property not previously reported to the Unclaimed Property Division and unclaimed for the applicable period of dormancy should be included in the report. Holders are required to report all available Owner information – including last known address, the date last contacted, and a description of the property.  Submitting as much information as possible will reduce the need for further contact by the state.

Submitting Report and Remittance
Property reports must be submitted to the Unclaimed Property Division via a secure file transfer portal in the NAUPA format via the Unclaimed Property Division’s website under Submit a Report. A PDF copy of the NAUPA Standard Electronic File Format can be found on the NAUPA website under Reporting. Holders failing to submit a report will be subject to a penalty.

Retain Records
A record of the name and last known address of the Owner must be maintained for ten years after the property becomes reportable. If audited, and this information is unavailable, penalties may be incurred.

Voluntary Disclosure
The State offers a Voluntary Disclosure Program for those who haven’t been compliant or who have discovered unclaimed property which should have been reported. This program provides a way to report those over-looked properties – without penalty or interest. Further details regarding this program are available on the Unclaimed Property Division’s website under Reporting Guidelines.

Government and Public Entities
Government and Public entities have some differing guidelines. The Public Entities Reporting Manual is available in digital form on the Unclaimed Property Division’s website under Reporting Guidelines.

Resources

SD Unclaimed Property Division Website: https://southdakota.findyourunclaimedproperty.com

NAUPA Website: https://www.unclaimed.org

SD Codified Laws: https://sdlegislature.gov/statutes/Codified_Laws/Default.aspx

Kimberly Beck

Kimberly Beck

Kimberly is an Associate in the Accounting Services Department in the KTLLP Rapid City office.
Kimberly Beck

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