Contingent Fee Auditors Are Interested in Your Company’s Unclaimed Property

Enforcement of unclaimed property regulations has evolved to include not only large corporations, but also small to midsize businesses. Entities that were previously off the auditing radar are now facing fines, penalties and interest for non-compliance. This is a direct result of states’ rapidly changing escheatment laws and their use of third-party contingent fee based auditors in 40 states.

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One piece of the Temporary Extension Act of 2010 (H.R. 4691), signed into law earlier this month, was an extension to the COBRA subsidy and eligibility. Through March 31, 2010, employees involuntarily terminated will be eligible for the subsidy as previously clarified by the IRS. Employees already receiving benefits will continue until that date.

Under the American Recovery and Reinvestment Act of 2009, a new employer-provided COBRA subsidy was created to assist individuals who lose their jobs involuntarily during the current economic recession. The subsidy was originally scheduled to expire at the end of last year, but the 2010 Department of Defense Appropriations Act, enacted on December 19, 2009, extended the subsidy’s eligibility period and the maximum duration of COBRA premium assistance.

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New guidance issued last month by the Michigan Department of Treasury (DOT) on its interpretation of the Michigan Supreme Court’s recent Kmart Michigan Property Services (KMPS) ruling may create exposure for companies doing business in Michigan. Taxpayers considered disregarded entities for federal tax purposes previously filed as a division of the owner for the Single Business Tax (SBT) Act. However, because of the KMPS ruling, disregarded entities must now file a separate SBT return for all open tax years.

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In an effort to both protect employees and raise funds, the federal government is stepping up enforcement of misclassified worker penalties. Many firms wrongfully classify employees as “independent contractors,” both by mistake and in an effort to avoid certain payroll and benefit obligations. The Obama administration estimates revenues from this crackdown could amount to $7 billion over the next 10 years.

Tough economic conditions have exacerbated the problem as more companies are willing to skirt the lines of legality to save money, and fewer employees are willing to report abuses for fear of losing their jobs. The New York Times reports on the effects this could have on both government revenue and business expenses.

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An economic recession creates a threatening mix of conditions for companies beyond decreased income. Employees are more likely to pursue fraudulent activity due to personal financial pressures, and businesses are often too preoccupied with meeting immediate debt obligations to detect the activity. As the Institute of Internal Auditors (IIA) reports, fraudulent activity rose in 2009 and is expected to continue to rise in 2010.

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The American Recovery and Reinvestment Act (ARRA) appropriated $787 billion dollars for a combination of federal contract spending and tax cuts. One year later, many critics are wondering why so little seems to have been accomplished by so large an appropriation. One reason is the mutli-tiered nature of the spending. According to government reports, the lion’s share of appropriated funds have not yet been obligated to projects, or paid out.

According to its schedule, the full $787 billion will not be obligated and paid out until well into 2011. The Wall Street Journal reports on the types of projects affected by this gradual start, and when to expect a more significant-looking impact, particularly in job growth from Stimulus funds.

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Although the wireless phone bill is a significant monthly expense for many companies, the bill generally receives only a routine examination. But a close reevaluation of a business’s mobile phone plan could lead to substantial savings. Diana Ransom of Entrepreneur offers this suggestion:

“The mere act of calling your provider and asking about a better deal can yield improved terms and price breaks – especially these days, says Paul J. Rauseo, the managing director of George S. May, a small-business management consulting firm in Chicago. “Thanks to the downturn, carriers are trying even harder to keep your business,” he says. “They’re offering shorter contracts, reduced rates. And free phones are pretty much up for grabs.”

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Keeping your employees positively engaged in a down time can keep your business on track and moving forward. Sarah Needleman from the Wall Street Journal reports on a few ways to boost morale during winter months.

“Oftentimes simple gestures can make a positive impact on the way employees feel about their jobs. Here’s how to let your staff know their contributions matter.”

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Anyone wishing to claim their donations for Haitian Earthquake Relief on their 2009 tax return must make those donations by the end of this week. Individuals and corporations have until midnight on Sunday, February 28th, to make cash contributions to charities providing earthquake relief in Haiti. These contributions can be claimed on either a 2009 or 2010 return, but not both. Contributions made after that date but before the end of the year can only be claimed on a 2010 return.

Contributions made by text message, check, credit card or debit card qualify for this special option. Donations charged to a credit card before the end of February count for 2009. This is true even if the credit card bill is not paid until after February 28th. Also, checks count for 2009 as long as they are mailed by the end of this month and clear your financial institution shortly thereafter.

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Last week, the Senate unanimously passed the Small Business Penalties Fairness Bill (S. 2917), intended to change the way the IRS assesses penalties for dealing with designated tax shelters. The penalties now will be in proportion with the benefit received by the transaction.

“These penalties are intended to punish big corporations who attempt to skirt their tax obligations by investing in abusive transactions, not break the backs of small businesses who unknowingly fail to disclose the proper information,” said Senate Finance Committee Chairman Max Baucus, D-Mont., in a statement. “This legislation will protect small businesses from excessive and unfair tax burdens by bringing tax penalties in line with tax benefits.”

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