Every business has skeletons in the closet, but in unclaimed property, those skeletons don’t stay buried for long. While fall filing season helps companies clear the liabilities they already know about, hidden unclaimed property compliance risks often lurk in the dark corners of finance and accounting: unreconciled records, outdated systems, and historical data that no one has revisited in years.
These dormant balances, forgotten subsidiaries, and overlooked property types have a way of rattling loose during audits—or even surfacing in high-stakes moments like mergers and acquisitions.
The good news? With the right visibility and proactive management, you can face those skeletons head-on before they turn into something truly frightening.
Dormant Liabilities Never Die
Old vendor credits, uncashed payroll checks, and unreconciled suspense accounts (temporary holding accounts for unreconciled payments or unidentified balances) are the ghosts of accounting past. They may not make noise day-to-day, but they’re still very much alive on your books. These are some of the most common unclaimed property compliance risks companies face year after year.
When states conduct unclaimed property audits, they look back as far as 10–15 years. That means balances you thought were long forgotten can suddenly reappear with interest and penalties that add up quickly. Some states assess interest rates as high as 12% per year, with penalties reaching $100 to $200 per day for late reporting.
Even small amounts can come back to life in terrifying ways once they’re aged, aggregated, and spread across multiple years of noncompliance. What starts as a few missed checks can become tens of thousands of dollars in liability.
Lesson: Burying liabilities isn’t the same as resolving them. Conduct periodic dormant property reviews and reconcile suspense accounts at least quarterly to keep skeletons where they belong—out of sight and out of risk.
Subsidiaries and M&A Ghosts
Mergers, acquisitions, and divestitures often leave compliance gaps. When one entity acquires another, it also inherits its historical liabilities. Auditors are skilled at connecting these dots. They use prior state filings, legacy tax IDs, SEC records, and historical business registrations to trace old entities back to their current corporate parents.
For example, if Company A acquires Company B and the transaction rolls up under a new tax ID, the state can still link Company B’s prior filings or non-filings through its historical identifiers. Years later, the state may issue an audit notice directed to Company A as the surviving entity.
We’ve seen “ghost” subsidiaries or legacy divisions come back to haunt the parent company (i.e., the acquirer) long after a deal closes.
Lesson: In M&A transactions, due diligence should always include an unclaimed property review. A quick liability scan during negotiations can identify dormant accounts or past reporting lapses that might otherwise reduce deal value or delay closing.
The Phantom of Forgotten Property Types
Unclaimed property isn’t limited to checks and refunds. Retirement plan balances, dividend payments, securities, rebates, stored value cards, and even cryptocurrency now fall under state reporting laws. Yet many organizations still overlook these categories or assume they don’t apply.
This gap often exists because internal policies, particularly unclaimed property policies, haven’t been updated to reflect newer asset types or changing dormancy rules. As states modernize their statutes and incorporate digital assets, more categories of “property” become reportable each year.
Lesson: Don’t assume your unclaimed property policy from five years ago still meets today’s requirements. Review it annually, verify coverage for all business units, and confirm that newer asset types are being tracked to ensure nothing is hiding in the shadows.
Audit Monsters in the Dark
Once a state—or its third-party auditor—starts digging, every drawer, spreadsheet, and subsidiary is fair game. Multi-state audits are a monster many companies underestimate and are becoming increasingly common. States frequently partner with contract auditors who represent 10 to 30 states at once, meaning a single audit can quickly expand in scope and duration.
These audits typically last three to five years, requiring hundreds of hours of staff time to locate old records, reconcile accounts, and respond to examiner requests. Penalties and professional fees can exceed 50% of the property’s value, depending on how far back the findings reach.
These “audit monsters” often appear when companies haven’t reviewed their historical records, consolidated entities, or tracked policy changes over time.
Lesson: The best defense is daylight. Conduct proactive risk assessments and internal reviews before an audit notice arrives. If you discover gaps or missed filings, consider entering a voluntary disclosure agreement (VDA) to resolve them on favorable terms before the state comes knocking. It’s far less scary to open your own closet than to have someone else do it for you.
Warding Off the Hauntings
Clearing out compliance skeletons doesn’t have to be terrifying. A few key actions can bring peace of mind:
- Perform a diagnostic review to identify dormant property across entities and systems.
- Address old liabilities through voluntary disclosure agreements (VDAs) before they attract audit attention.
- Use compliance software like UPNavigator® to track dormancy, automate due diligence, and streamline reporting across all states.
- Train your accounting and legal teams to spot unclaimed property risk factors early, especially before mergers or system conversions.
Lesson: Shine a light into the dark corners now, and next year’s filing season will feel a lot less spooky.
Facing Your Skeletons: A Final Word
Halloween is the perfect reminder that hidden risks rarely stay hidden forever. From dormant balances to forgotten subsidiaries, every business has a few skeletons in the compliance closet. The trick is facing them before they rattle out when you least expect it.
Proactive reviews, updated policies, and modern reporting tools are the best way to keep your compliance record clean year-round. The sooner you identify risks, the easier it is to correct them, and the less likely they are to haunt you later.
The scariest part of unclaimed property compliance isn’t what you can see—it’s what you haven’t found yet. Don’t let those ghosts linger. UPCR can help you uncover, manage, and prevent unclaimed property exposures before they turn into a fright.