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FOR IMMEDIATE RELEASE

Lohman Company, PLLC Releases Unclaimed Property Reporting Guidelines

Tax Alert

February 16, 2004 -- This letter detailing the Arizona Unclaimed Property Reporting rules was recently mailed to our business clients. You may already be aware of these requirements, but we wanted to share with you the information that we are providing to our business clients. We hope this is useful information for you and your clients.

Lohman Company, PLLC likes to keep our clients informed about items we feel will have an impact on you and your business. This letter is a refresher on the Unclaimed Property laws in Arizona. The Arizona Department of Revenue is placing an increasing emphasis on compliance with the annual reporting requirements and remittance of unclaimed property to the Department of Revenue. The unclaimed property laws apply only to businesses, not individuals.

Unclaimed property is defined as any amounts you owe to others in the course of business that they have not collected. Amounts under $50 do not have to be detailed in the report and can be lumped together. The most common forms of unclaimed property are outstanding payroll checks and outstanding vendor checks, although there are other types of property that qualify.

The unclaimed property report covers the period from July 1 to June 30 and is due on November 1. After the holding period, all unclaimed funds need to be sent to the Department of Revenue with the annual report filed each year. This report is available from the Department of Revenue website, www.revenue.state.az.us. The holding periods vary for each type of property, but paychecks have to be held for one (1) year and vendor checks need to be held for five (5) years.

You may make a one time election to change your report due date to the same time you report your Arizona corporate income. We would be happy to assist you in making this election.

The annual unclaimed property report should be filed even if you have no property to report. If you file an accurate unclaimed property report, the Department of Revenue has four (4) years from the date of filing to audit you and determine if you reported all of your unclaimed property. If you file an unclaimed property report that substantially understates the amount of unclaimed property you are in possession of, the Department of Revenue has six (6) years from the date of filing to audit. If you never file a report, even if you had no unclaimed property for that year, the Department of Revenue has no limitations on the time they can go back and audit you. In other words, there is no statute of limitations if no report has been filed.

Below is an example of how the unclaimed property laws work. We will use an employee who does not cash a paycheck as an example:

1. You need to make an attempt to contact the employee at their last known address at least 120 days prior to the end of the holding period, which is one year for paychecks. This means that you need to try and contact the employee before the check has been outstanding for eight months.
2. If you cannot locate the employee, you need to hold on to the funds for the employee for one year to give the employee a chance to come in and collect their money.
3. After one year, you should void any outstanding checks, and include the amount in the check that you submit to the Arizona Department of Revenue with your annual unclaimed property report.

If you have sent in the money to the Department of Revenue and the employee comes in to collect, you can have the employee go to the state to fill out a claim form to get the cash or you may pay the employee and fill out a claim form to get your money back from the state. You need to attest to the fact that the person who was owed the money actually received it.

The annual report you file if you have no unclaimed property to report (“Negative Report of Unclaimed Property”) should take 5 to 10 minutes to file and more importantly, it starts the statute of limitations running.

We have spoken with an officer in the audit section of the Department of Revenue. The Department of Revenue is in a voluntary compliance period at the moment, and there will be no penalties or interest for late reports or catch up reports if none have been filed in previous years, as long as the unclaimed funds are sent in to the Department of Revenue. To qualify for this voluntary compliance program, you must first talk to this revenue officer, so please contact us before filing so that we can direct you to the proper person.

Our staff at Lohman Company, PLLC is committed to keeping our clients informed and minimizing their audit risk. We will be happy to assist you in preparing these reports and becoming compliant with the unclaimed property laws. Please call us if you want assistance or need further information.

For More Information Contact:

Lohman Company, PLLC
Stapley Center
1630 South Stapley Drive, Suite 108
Mesa, AZ  85204

Phone:   (480) 355-1100
Fax:       (480) 355-1130
Internet: info@lohmancompany.com