Pub. 1 2019-20 Issue 1

Issue 1 2019 21 WVADA A ll 50 states have unclaimed property laws. Over the past few years, many states have increased their monitoring of businesses’ compliance with unclaimed property laws in an effort to find new revenue sources. In fact, West Virginia has initiated a self-audit program within the last few months and issued letters to some businesses encouraging them to partic- ipate in the self-audit program to avoid an on-site audit and assessment of penalties and interest. Businesses of all types are required to electronically report unclaimed property to the West Virginia State Treasurer’s Of- fice on a yearly basis. The Treasurer’s Office does not send re- minders of this annual filing requirement to businesses; there- fore, many business owners are unaware of the requirement and are not in compliance with the unclaimed property laws. Even if an owner is aware of the unclaimed property report- ing requirement, many errantly believe their business is not holding any unclaimed property. Common types of unclaimed property in an automobile dealership include: uncashed final payroll checks, uncashed refund checks issued to customers, unclaimed we owes, and unredeemed gift certificates. This noncompliance can be very costly in an audit. An audit period can be ten years or more and interest and penalties can be added to the assessment. Auditors are also allowed to extrapolate the results of a shorter period to determine a liability if records are not available for the whole audit period. The final outcome can be a grossly overstated assessment. The best way to protect against this exposure is to establish some best practices. Appoint an individual to oversee compliance and administration of unclaimed property protocols. As with any other reporting requirement, the job will not get done unless it is assigned to someone. Generally, the most qualified person in a dealership to oversee this task is the CFO, controller, or office manager. Educate applicable employees about what unclaimed proper- ty is, how to report transactions properly in order to correctly identify unclaimed property, and the potential impact it could have on the business. Two common examples of transactions not being recorded properly are closing repair orders for we owes to policy ex- pense instead of matching it to the liability and not voiding original checks when a replacement check is issued. The result is an inaccurate reporting of unclaimed property. Perform due diligence. Due diligence is the process of attempt- ing to contact the owner of the property (i.e. former employ- ee for uncashed paychecks, customers for uncashed refund checks, unclaimed we owes, and unredeemed gift certificates) to give them a last opportunity to claim the property before remitting it to the applicable state’s unclaimed property. This practice should be performed in a timely manner as a way of minimizing the amount of unclaimed property to be remit- ted to states and to maintain good customer relations. File an initial report with all applicable states if no reports have been filed. The unclaimed property should be remit- ted to the state of the owner’s last known address. Accord- ing to the West Virginia State Treasurer’s Office website, a first time filer should go back to the records from the be- ginning of the business, however, a minimum of ten years should be reviewed. Establishing these best practices and becoming compliant with state unclaimed property laws can be challenging. Tet- rick & Bartlett, PLLC can assist with the process. For more in- formation, contact Tasha Sinclair: 304-624-5564 or thartley@ tetrickbartlett.com. t Unclaimed Property Audit Exposure By Tasha R. Sinclair, CPA/ABV, Tetrick & Bartlett, PLLC BY THE NUMBERS