USA When to Escheat

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I have a question regarding the application of escheatment in A/P. At my office, we stale date checks after 6 months and redeposit them accordingly. For AP, we stale date and then contact the approving manager for that invoice to find out if the vendor needs the check reissued or not. The check is reversed back into the expense account and reissued or not depending on that managers response.

Illinois says property doesn't need to be turned over unless it has gone unclaimed for 5 years.

How does this apply to AP and should I be concerned by our stale dating process?

Thanks,

JE
 

kirby

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The uncashed checks are not YOUR property. So you cannot just reverse the check and keep the money. That money is unclaimed property and is covered by the Illinois escheatment law. As far as being concerned, I know that California can assess up to $50K penalty if they find someone is not complying with the law. You should look up Illinois' penalty so you can be aware of the consequences. You should also find out if the state considers noncompliance as a civil or criminal infraction. The escheatment penalties vary state by state. Yes, there is an interest charge too for not paying when due.
 
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Your office procedures are fine assuming that your company has the cash in the bank when/if the vendor comes to collect their payment.

Honesty and Integrity.
 

kirby

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That is not correct. Please read the escheatment law for the relevant US state.

As you yourself are in BC, look up the BC Unclaimed Property Act.
 
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Kirby is right in that any uncashed checks are subject to various unclaimed property laws. However, it is not just Illinois that you have to be concerned with. Each US state (plus Puerto Rico, Virgin Islands, DC and Guam) and some Canadian provinces have their own unclaimed property laws. Under US Supreme Court guidance, it is the payee's state that has the rights to collect the amounts as unclaimed property. So, if you have a check with the payee address in say Georgia, you would have to remit those checks to Georgia and not Illinois. Each state has varying penalties for non-compliance, including criminal penalties in certain circumstances. The states have gotten aggressive with audits as well. They use multi-state contingent fee auditors to go after companies that are not in compliance with the law.

I would definitely be concerned about your process. While stale dating in and of itself is not wrong (actually good, because you do not want the bank honoring old checks), you do need to ensure that your processes account for these uncashed checks and handle accordingly. Some companies put them in a liability accrual account until they are dormant under the appropriate state's laws when they are reported. Other companies leave them on the outstanding check list until they are dormant. In any case, if the payee comes back to you before they are reported, the amounts should be available for them, but a new check would need to be issued.

Here's another kicker - state unclaimed property laws also say that statute of limitations don't apply. So if your contract says that the payee has three years to claim and the payee never claims the money, the amounts may still be reportable as unclaimed property. Delaware, the state of incorporation for approximately 1 million entities, audits back to 1986.
 
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That is not correct. Please read the escheatment law for the relevant US state.

As you yourself are in BC, look up the BC Unclaimed Property Act.
I'm assuming the person in question is not dealing with material dollar amounts.
 

kirby

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To JWMCA

When folks are asking questions on this forum, I think the proper assumption is that the issue is significant. Else we could answer every question on this forum by saying "not important to give a correct answer as we assume amounts are insignificant." I believe we owe the person posting a question our best efforts.
 
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That's is your opinion and you are entitled to it. One I respect, such as I am entitled to mine.

It's clear that not everyone posting in this forum is at the professional level or dealing with large dollar values. I have seen time and time again various clients/employees and owners go down the "rabbit hole" on various issues when in fact the issue is not material and there is a simpler answer right in front of them.

How much money are we talking about here jssy330?
 

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