Unclaimed Property – State of Michigan Filing Requirements

Kristi Krafft-Bellsky

It’s that time of the year when the State of Michigan would like all organizations to look through their bank reconciliations to determine if there are any uncleared checks that have reached a dormancy period as of March 31, 2018, that would require reporting to the state. A general rule of thumb is that the dormancy period is one year for payroll checks and three years for most other checks.

According to the Michigan Department of Treasury’s 2017 Manual for Reporting Unclaimed Property, beginning in 2018, the State of Michigan will require the filing of zero balance reports for businesses and governmental agencies without unclaimed property, such as uncashed payroll or vendor checks and other items comprising unclaimed property. The filing requirement is a revision of the most recent change in 2012, which only encouraged, but did not require, reporting of zero unclaimed property situations. Under the negative attestation requirement, businesses and governmental agencies must ensure they are filing even in situations where entities have no unclaimed property. Based on conversations we have had with the Unclaimed Property Division, there is a probability that the zero balance reporting requirement may be rescinded for 2018. However, this does not excuse organizations from evaluating the unclaimed property in their possession as of March 31.

Deadlines for reporting

Current rules require the unclaimed property to be identified as of March 31 of each year and reported to the State on or before July 1. Once properties have been identified, organizations must prepare and mail due diligence letters to the property owners by April 15. By May 15, organizations must determine which property owners have not responded to the due diligence letters. Then, starting on June 1, organizations should begin preparing the annual unclaimed property report. Property that has reached its applicable dormancy period as of March 31 must be remitted with and reported on Michigan State Form 2011, Michigan Holder Transmittal for Annual Report of Unclaimed Property, and the appropriate annual reporting form (there are separate forms for cash and safe deposit boxes, and for securities). If the holder (business or government entity) has more than ten items to report, they must use electronic media for the annual report. The due date for this filing is July 1 (or the next business day if the 1st is on the weekend).

Penalties for failing to report

Fines and penalties may be assessed for organizations who fail to file reports. Fines may be imposed of $100 per day for each day that the report is withheld, or the required duties outlined in the previous paragraph are not performed, not to exceed $5,000. Also, a 25 percent penalty on the value of the property that should have been paid or delivered may be assessed in addition to interest charged from the date that the property should have been delivered to the State of Michigan.

Consider using free reporting software

Free reporting software is available on the State of Michigan web site at http://www.michigan.gov/treasury/.

The web site is a valuable resource for information regarding the law, filing requirements and related penalties, including the 33-page Manual for Reporting Unclaimed Property. The 2018 manual is not yet available, and based on the release date of the 2017 manual, it may not be available until May of 2018. Once the manual has been posted online, Yeo & Yeo will provide an e-Alert that it is available and if the zero balance report will be required.

Contact Yeo & Yeo for additional assistance.

 

Kristi Krafft-Bellsky

Kristi Krafft-Bellsky

CPA

Kristy Krafft-Bellsky, CPA, Director of Quality Control, is responsible for internal quality control throughout Yeo & Yeo’s nine offices. She oversees the development and implementation of policies and processes to comply with professional standards and regulatory requirements. She also manages the peer review process. Kristi led the development of the firm’s award-winning LEAN Audit Process that significantly benefit the firm’s clients and professional staff. She is a member of the firm’s Audit Services Group and Education Services Group.