Find Lost Money

Unclaimed property refers to accounts in financial institutions and companies with no activity generated or contact with the owner for one year or longer (depending upon state law). One out of ten Americans is estimated to have unclaimed property or money floating around.

Typical forms of unclaimed property include savings or checking accounts, stocks, uncashed dividends or payroll checks, refunds, traveler's checks, trust distributions, unredeemed money orders or gift certificates (in some states), insurance payments or refunds, life insurance policies, annuities, certificates of deposit, customer overpayments, utility security deposits, mineral royalty payments, contents of safe deposit boxes, and IRA or other types of retirement accounts—even tax refunds from the IRS.

Financial institutions and companies will turn these funds over to a state unclaimed property department, where the funds are held until claimed by the owner. This process is termed escheatment. This typically occurs when you relocate, close a business address, misplace a check, etc. It can also happen if you are the beneficiary of an estate and the trustee cannot locate you. You may even discover forgotten accounts of now-deceased relatives if you take the time to search each one.

There are various ways to locate these assets. There are commercial firms that may seek you out. However, you can perform a search for free in several ways. For instance, each state has a website for its unclaimed property department, allowing you to search state by state. Generally, you would only search the states where you (or a long-lost or deceased relative) have been a resident.

A website developed by the National Association of Unclaimed Property Administrators (NAUPA) provides links from a map to each individual's state's search site, Canadian provinces, some foreign countries, and various government agencies.

Each state has its own process – usually pretty straightforward – when you're ready to claim your lost money. It will help if you are prepared to show proof of ownership of whatever you claim, such as a pay stub, utility bill, or Social Security number. You will also need proof of identity, like a copy of your driver's license or passport. Processing times vary by state, but some can take less than 30 days.

Some other government sources with searchable databases include:

• The IRS website for any undeliverable tax refunds.

• The Pension Benefit Guaranty Corporation for unclaimed pension money.

• The U.S. Treasury Hunt for unclaimed savings bonds, registered Treasury notes, or registered Treasury bonds.

Also, if you relocated between states, you must check all the states where you resided.

But be careful, as there are also commercial firms with websites that will charge you a fee to do what you can do yourself for free.

There can be tax ramifications with unclaimed property. For example, under some circumstances, such as when a qualified retirement plan terminates. The account balance is turned over to the state as unclaimed property because the account owner (former employee) can't be found. The IRS says that the employer must (1) withhold federal income tax on the payment and (2) report the total amount of the distribution and the federal income tax withheld on Form 1099-R. (Rev Ruling 2020-24) The problem here is that if the account owner can't be located to receive the distribution of the account balance, it's likely that the 1099-R won't find its way to the individual either. If this distribution isn't reported on the individual's tax return as income, then the taxpayer could be subject to penalties and interest besides any tax that might be owed.

Based on IRS Revenue Procedure 2020-46, there could be some relief once the taxpayer receives the distribution. Generally, a taxpayer has 60 days to roll over a distribution from an IRA or retirement plan into another qualified plan and avoid being currently taxed on the distribution. There are several circumstances when the IRS will waive the 60-day requirement, including allocations to state unclaimed property funds, provided the taxpayer contributes the rollover to a qualified retirement plan as soon as practicable after receiving the unclaimed funds from the state. Whether the individual who makes a timely rollover can recover the tax that the employer withheld when the funds were given to the state depends on how long ago that occurred, as there is a limited time for a refund claim to be made to the IRS.

While some types of income you might receive from the state's unclaimed property department will be nontaxable, in most cases, the funds you receive will be treated as ordinary income and taxed at regular tax rates on the return for the year the payments are made to you.

What are your odds of finding some lost money? It's better than winning the lotto, and it only takes a few minutes to check and could yield some pleasant surprises.

Good luck, and if you have any questions about the taxability of the unclaimed funds, please call this office.