Deadline approaching to file “Unclaimed Property Voluntary Disclosure Agreement”

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Your business may be one of the over 350,000 companies with Michigan operations who recently received a notice from the Michigan Department of Treasury, urging you to file an “Unclaimed Property Voluntary Disclosure Agreement” (VDA).  Many of you may have questions surrounding the notice and how to comply.  The following question and answer segment is designed to assist with addressing some of these concerns.

Question #1:

Q: What is Unclaimed Property?

A: Unclaimed property is generally any fixed and determinable legal obligation owed to another that has not been paid out to them prior to the expiration of the dormancy period.  The top four unclaimed property types are:
(a)  accounts receivable credits,
(b) uncashed payroll checks,
(c) uncashed vendor checks, and
(d) uncashed employee benefit checks involving third party administrators.

Other property types can include unredeemed gift certificates, gift cards, rebates, etc.

Question #2:

Q: What are the benefits of completing a VDA?

A: Completing an accurate VDA provides companies with the following benefits:

–    Limit the “look-back” period to 2001/2002 (otherwise, the general look-back period is until 1995)
–    Abate penalties (25% of value of unclaimed property reportable) and interest at published rates.

This is significant considering most companies do not maintain accounting records past 7 years.  In addition, abatement of 25% penalty and interest on the entire assessment is important, given that many audit assessments we have seen in states using similar techniques have come in at over $1,000,000 for companies with revenues above $100M.  If you file a VDA, you should be prepared to analyze your records back to 2002, and verify that all the outstanding unclaimed property has been cleared in the lead-up to the June 30 deadline.  It should be noted that the state does not waive their right to audit the books and records and that interest may be imposed on holders who do not comply with the VDA prior to 7/1/2012.

Question #3:

Q: What deadlines do I need to be aware of?

A: The deadline for filing a voluntary disclosure per the form 4689 is 1/31/2012, with analysis and payment due 6/30/2012.

Question #4:

Q: Where can I find more information?

A: More information about Unclaimed Property can be found at the Michigan Department of Treasury Web site1 and BDO USA, LLP.2  Copy and paste the following link into your browser – http://image.s4.exct.net/lib/fe9d15707766007c7d/m/1/Unclaimed+Property+Notice_Dec2011.pdf – to review a sample of the notice and form that you may have received in the mail.  Companies should also consult with their CPA prior to submitting a VDA.

1 www.michigan.gov/unclaimedproperty

2 http://www.bdo.com/documents/UnclaimedPropertyNoticeMichiganEscheatWIINOHVersion121611.pdf

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