With the state of Michigan focusing increasing attention on the reporting of unclaimed property by businesses, the number of unclaimed property reporting audits is likely to increase. In tandem with this effort, the Michigan Department of Treasury (MDOT) has started to mail out tax notices to taxpayers informing them of a new limited duration voluntary disclosure program.
MDOT has created an unclaimed property voluntary disclosure program allowing taxpayers that have not previously reported—or have underreported unclaimed property in the past—with an opportunity to voluntarily approach the MDOT to comply with the requirements of Michigan’s Unclaimed Property Act. The benefit of participating in this program is the MDOT will waive all penalties and interest on property voluntarily remitted to the state under voluntary disclosure program.
What is unclaimed property?
Unclaimed property is tangible and intangible property in the custody of your business legally owned by or owed to someone. Holders of unclaimed property are required to make efforts to find the owners and turn the property over to them. If the period during which the property remains unclaimed by the owner and in the custody of the business exceeds what is called the "dormancy period," the property must be turned over to the state of Michigan. Examples of unclaimed property include uncashed payroll checks, inactive stocks, dividends, gift certificates/cards, checking and savings accounts as well as many other property types. The dormancy period for uncashed payroll checks is one year after which they must be reported and paid to the MDOT.
While it is common business practice to cancel such obligations and take the unclaimed property back into income, it is contrary to state unclaimed reporting statutes. In addition, if a business fails to file an unclaimed property return, the statute of limitations does not close for the year the return is due. This can create material exposure for prior-year payments of unclaimed property, interest, and penalties. Unclaimed property auditors often employ estimating techniques where data and information is lacking that can be difficult to dispute. The normal "due process" rights that exist under state law may not be available.
How do you participate in the voluntary disclosure program?
According to the MDOT, to enroll in the program, you must complete and return the Michigan Unclaimed Property Voluntary Disclosure Agreement (Form 4869) by Jan. 31, 2012. If you are certain you do not have unclaimed property to report and remit, complete and return the Attestation of Compliance with Unclaimed Property Reporting (Form 4305) by Jan. 31, 2012. To be eligible, you must file unclaimed property reports for the previous four reporting years. If records are not available for certain property types or review periods, you are required by law to estimate the amount of unclaimed property for the property types and review periods for which records are not available.
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