Have you ever written a payroll check to an employee for a small amount and it’s aggravating because they never cash it. You don’t know what happened. Did they wash that in the washer and didn’t really care because it was for $5 and 42 cents, or is there some bigger issue going on?
Well, anytime that you write a check as a business owner and it doesn’t get cashed, you have to give that to somebody eventually. You cannot keep that check.
Now, I’ve seen a lot of cases where the check has just been voided, but your legal obligation is to file that check with the unclaimed property department of your state at some point in time.
So let’s talk a little about unclaimed property and what it is and how you handle it.
Unclaimed property is the collection of monies that were owed to somebody that they never got. They’re not rightfully yours anymore.
So you may have seen there are websites you can go out and check and see if you’re due money and it’s like found money. It’s really exciting. You hop out there and type in your name in your state’s unclaimed property funds and it’s like going to Vegas.
You may find that there’s some check out there ready for you and if you, they find your name and you can identify yourself, they will mail you that check from a state.
So how’d that money get there?
Well, that’s the process of unclaimed property. So typically you find with banks and insurance companies especially, or utility companies. A lot of times you had a utility deposit when you first got hooked up with service and somehow you never got it backed, those companies have to remit funds to the state.
Each year there’s a department of unclaimed property or Escheat Laws that apply and they send that money to the state and the states hold it and one day you’ll be able to claim it or upon your death, somebody else can claim it if they can prove that they’re the beneficiary.
When those funds are sent there, sometimes they take a long while for people to collect on them and there are some things that probably won’t ever be collected, but the state holds those funds. So you can’t just void the check and say, oh, well they didn’t cash my check.
So as a business owner, what do you have to send to the unclaimed property department?
Well, the first thing, like I said, is uncashed checks, whether they be payroll checks or vendor checks, you’re ultimately supposed to send them to the state.
Now you don’t have to wait 30 days and then send them to the state. There’s a longer timeframe that we wait and I would suggest you get in contact with that employee or the vendor and try to rectify the problem without involving the state government in it.
But if ultimately you can’t get in touch with somebody if they have a credit with you or you owe them funds and they’ve not cashed your check, you can check each state’s Unclaimed Property Department to find out how you file that and send that in.
Now I’m gonna be realistic.
I don’t see this happening too much in small business worlds. I see it in banks, insurance companies and utility companies specifically, but it does also apply to you.
So what happens if you don’t? If you’re audited, then they could dive deeper into other things and fine you and penalize you through interest, finance charges, things like that.
So it’s not something you wanna mess with, but it’s much easier to try to track down the employee, or the vendor and try to get it rectified that way. Maybe reissue the check void the other one.
I know that’s a hassle, but it’s way more of a hassle to have to deal with the state government to do this. There are Unclaimed Property laws in all 50 states and Puerto Rico, so you don’t really just get off the hook on this one.
So give it a shot. Make sure you comply. Like I said, track down the person first and check the details of when you have to file. Also, you may wanna pop out there and check the rules for your state. At one point South Carolina in particular had a law where even if you didn’t have unclaimed property, you had to file a report saying you didn’t have any each year and you were subject to penalty if you didn’t file that.
I haven’t heard anything about that in a long time. So I’m suspecting that they decided that was a quite a burden and it was overturned. But check your state’s laws just to be sure that you’re in compliance with unclaimed property.
For additional read: Top 5 Things You Can Do to Organize Your Business
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Donna Bordeaux, CPA with Calculated Moves
Creativity and CPAs don’t generally go together. Most people think of CPAs as nerdy accountants who can’t talk with people. Well, it’s time to break that stereotype. Lively, friendly, and knowledgeable can be a part of your relationship with your CPA, as demonstrated by Donna and Chad Bordeaux. They have over 50 years of combined experience as entrepreneurial CPAs. They’ve owned businesses and helped business owners exceed their wildest dreams. They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.