The State acts as a custodian of these funds until the rightful owner(s) can be located, verified, and the assets returned. New Jersey has recently started selecting auto dealerships for compliance audits. The audits conducted by the State can take years to complete and penalties are potentially substantial. The look-back period for an audit is ten years but, if no reports were filed, there is no limit to the look-back period. The unclaimed property statutes allow the State to impose assessments based on estimates or statistical methods.
It is imperative that owners and management of New Jersey auto dealerships become informed about the statutory obligations applicable to “holders” of unclaimed property. Auto dealers should work with their tax professionals to develop policies and procedures that ensure compliance going forward. For dealers that have not complied with unclaimed property requirements in the past, your tax professional can provide guidance for participating in the Voluntary Compliance Program (VCP). The VCP is an alternative to a potentially more arduous and costly full compliance audit. Benefits of the VCP include removal of all late penalties if the business successfully completes the program. In addition, simple interest is assessed on the total liability to the state under the VCP, while compound interest is applied to liabilities resulting from an audit.
New Jersey businesses and other “holders” are subject to laws requiring them to report and remit unclaimed property to the State Treasurer. Out-of-state businesses may also to be subject to NJ rules if the apparent owner of unclaimed property has a last known address in the State of New Jersey.
This notification to apparent owners should be mailed out not more than 120 days nor less than 60 days before filing the unclaimed property report.
Common examples are uncashed checks, including paychecks, customer credit balances, unclaimed refunds, and unclaimed “we owes.” The statutes contain a comprehensive listing.
Businesses that are noncompliant have the option to participate in the VCP as an alternative to a full compliance audit. Benefits of the VCP include removal of late penalties, although interest charges still apply.
The reach-back period of the VCP is 10 years from the property type’s statutory abandonment period. However, if the business has previously received the general informational memorandum from the State regarding filing requirements, a 15-year reach-back period may apply. Also, if a business has received an audit notice from New Jersey, it is not eligible to participate in the VCP. The business participating in the VCP must agree to report and remit unclaimed property for the reach-back period and comply with unclaimed property filings for future years. If a business does not have records for the full reach-back period, the VCP allows the business to conduct a self-audit covering years in which records exist and then, based on the results of the self-audit, the liability for years with missing records may be estimated.
Author: Louis Young | email@example.com and Rochelle Kimmins | firstname.lastname@example.org