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Michigan unclaimed property notices
As part of the State of Michigan's effort to raise awareness regarding businesses obligation of submitting unclaimed property to the State, the State recently mailed out notices regarding the voluntary disclosure program.
What is unclaimed property?
Unclaimed property is property that is in your possession that belongs to someone else and has not been claimed for a specified period of time. Examples of unclaimed property include uncashed vendor checks, uncashed payroll checks, customer overpayments, inactive stocks, inactive bank accounts, to name a few.
When must you submit the unclaimed property to the State?
Once the property reaches it required dormancy period as of March 31 of a given year, the holder of the property, after giving proper notification to the property owner, must file a report of the property and submit the property to the State by July 1 of the same year. Generally speaking, most property has a dormancy period of 3 years. One exception would be for payroll or commissions which has a dormancy period of 1 year.
For example, a business sends a vendor a check on September 1, 2008 that remains uncashed as of March 31, 2012. This vendor check has reached it dormancy period (3 years), therefore the amount should be submitted to the State of Michigan with the Unclaimed Property report by July 1, 2012.
What happens if you have no unclaimed property for the year?
You must file Form 4305, Attestation of Compliance with Unclaimed Property Reporting, with the State by July 1 of the year.
What are the penalties associated with not complying with the unclaimed property laws?
The amount of the penalties and interest can vary as follows:
Interest will be charged at the rate of prime plus 1% per month on the value of the property that should have been remitted to the State.
Penalties will be assessed if a person willfully fails to render any report at $100 per day for each day the report is late up to a maximum of $5,000. In addition, if there is payment that is due with the report and the person willfully fails to pay the amount, an additional penalty of 25% of the amount due will be assessed.
In addition, if after the State demands in writing to pay or deliver property to the State, a person willfully refuses to comply, the person is guilty of a misdemeanor which is punishable by a fine of not less than $500, but not more than $25,000, or imprisonment for not more than 6 months, or both.
How far back can the State audit a taxpayer?
An unclaimed property examination may cover up to the last 10 reportable years. Any amounts that are payable to the State due to the examination would be subject to the penalties and interest described above.
What should you do if you have not filed any unclaimed property reports?
According to the notice that was mailed by the State, taxpayers that have not previously filed reports have two options. Both options have a deadline of January 31, 2012. The options are as follows:
- If you are sure that you have no unclaimed property in your possession, file Form 4305, Attestation of Compliance with Unclaimed Property Reporting.
- If you have unclaimed property in your possession, file Form 4869, Michigan Unclaimed Property Voluntary Disclosure Agreement. Be aware by filing this Form that you are agreeing to:
- File the previous 4 years reports plus the current year report by July 1, 2012
- Be fully compliant with the Act going forward
- Perform the required due diligence on unclaimed property in excess of $50
- Agree that the Treasury does not waive its right to audit
By entering into the Voluntary Disclosure program, the Treasury will waive penalties and interest on the returns that are submitted through the program.
For more information or questions on this topic, please contact your professional at UHY LLP in Farmington Hills (248) 355-1040 or Sterling Heights (586) 254-1040 or visit us on the Web at uhy-us.com.
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