Uncashed Paychecks

Elizabetharess

We have several employees that are no longer working here and have not cashed a paycheck. The checks are over 6 months outstanding and we would like to void them. No reissue is planned unless the termed ee calls in and asks about their check.
Before doing this, I would like to ask if anyone out there knows if this is acceptable. I have never had to void a paycheck before and I can't find any information on the state site (WI) about uncashed paychecks.

joannie

Check with your state tax commission. In Oklahoma uncashed paychecks must be reported to the Oklahoma Tax Commission as "unclaimed property"

marc

I think every state has escheat laws. In essence, you give the unclaimed funds to the state and they will save it for the benefit of the intended recipient. There is a process involved for the payee to reclaim the dough. There is also a time frame by which you are supposed to give it to the state - basically how long you can retain the dollars before you are supposed to pass it on.

To my knowledge, states have no real way of knowing if you are holding such funds or not. I have not heard of a state auditing businesses looking for these types of funds, but that does not mean it doesn't happen.

Elizabetharess

I wondered if this fell under the escheat law. I am familiar with this from the insurance industry standards but never worked with payroll.
thanks

HRQ

[font size="1" color="#FF0000"]LAST EDITED ON 06-28-07 AT 11:00AM (CST)[/font][br][br]We are required to escheat unclaimed property, but I'm not sure of the timing requirement. Our accounting department reconciles the payroll bank account and lets us know if any checks don't clear.

We mail the check to the last known address. If it comes back as undeliverable we send a letter via certified mail advising the person we have their $. Sounds redundant, but we don't want to bother paying for certified mail until we've alrady tried mailing the check out. Often the employee just didn't bother to pick up the check, and they receive it in the mail.

If the employee responds to our letter, we give them their $. If they don't respond, we notify accounting and they escheat. T

he wages remain in the payroll system, because they still need to be included in the W-2.

We also have a process for "lost" 401k participants. If they leave the company and their statements come back to us as undeliverable, the IRS has a search service that we use to locate the employee.

Oh, forgot to mention that we are going through and IRS audit for this right now.