What do an uncashed check, a refund and a customer over-payment have in common? If not paid to the rightful owner by a specific time period, they may become unclaimed funds, and payable to the State of Ohio.
One common example we see among for-profits and nonprofits alike, is when a check made out to an Ohio resident for the payment of goods or services goes uncashed. It’s important to remember that unless the uncashed check is voided and re-issued, it becomes a reportable unclaimed fund a year after its issue date. You, the Payer must document an attempt to reach the Payee. If you can’t show that an effort was made, the funds become payable to the State of Ohio.
You may be exempt from taxes, but chances are you’re not exempt from this filing.
If you’ve received a reminder from the Ohio Department of Commerce (ODC) outlining your organization’s responsibility to file an Annual Report of Unclaimed Funds, don’t ignore it or throw it out. Ohio-based organizations that hold funds due to Ohio residents, including not-for-profit entities, are required to file this form and failure to comply could be costly. So, unless your organization is a political subdivision of the state or an Internal Revenue Code 501(c)(3) tax exempt hospital, it’s time to learn a little bit more about this important reporting responsibility.
Organizations that have been audited and failed to report unclaimed funds or under reported unclaimed funds can face substantial penalties. The state may assess two civil penalties of $100 per day and criminal penalties of up to $500 a day as well as an interest at a rate of 1 percent per month on the balance of unclaimed funds due.
Each type of unclaimed fund has a designated dormancy period, generally one to five years. A complete list of unclaimed funds by type, what their dormancy periods are can be found on page 26 of the Unclaimed Funds Annual Report booklet, a comprehensive resource issued by the ODC.
Using June 30 as the cutoff date, your organization is responsible for reviewing its own financial data for reportable unclaimed. As long as these funds do not fall under one of the exceptions, which are also outlined in the booklet, they become reportable and payable to Ohio. Once your assessment is complete, your organization must file the form and remit payment to the ODC.
Businesses and organizations, other than life insurance companies, must file their annual reports no later than Nov. 1; and extensions can be requested.
Once the state of Ohio receives your payment, unclaimed funds are deposited and held until claimed by their rightful owners. At this time, there is no deadline for owners to claim these funds.
Because the state is responsible for holding and administering funds, Ohio businesses and nonprofits are released from this liability while providing residents with the ability to search one centralized location for funds that may be owed to them. If claimants can prove they are the rightful owners of the unclaimed funds, the state is then responsible for transferring the property over to the claimant.
Email Rea & Associates to learn more about your organization’s responsibility to file an Annual Report of Unclaimed Funds and how to simplify your nonprofit’s reporting processes across the board.
By Katie Brown, CPA (Zanesville office)