10 Jul Credit Balances – Unclaimed Property Law

Credit Balances – Unclaimed Property Law

July 2017

What is unclaimed property?
Unclaimed property is any amount owed to another, such as uncashed payroll or vendor checks, gift certificates, unused deposits, credits, overpayments, etc.

What is the Washington State law?
The law states that after 3 years of failed attempts to return unclaimed property to rightful owner, property must be turned over to the State of Washington. Once received, Washington will continue to contact rightful owner to settle funds.

How does this apply to you?
This would apply when purchasing accounts receivable which may have credit balances owed to patients. These credit balances (overpayments) should reduce the valuation of the accounts receivable because they will likely be deemed unclaimed property, returnable to the patient or reportable to a state. State regulators are enforcing unclaimed property laws more than ever today to offset budget shortfalls brought on by tax cuts, diminished fee collections, and additional expenses associated with combating terrorism. There has been a major increase in audits as states are looking for sources of untapped revenue. For example, states collected over $20 billion in 2005 in unclaimed property. To avoid an audit be sure to stay on top of credit balances by not letting them accumulate. We tend to see practices with high front office turnover, which seem to carry greater total credit balances. Credits also come into factor when a practice is transitioned. It is at that time the full balance is addressed and reconciled in which the seller has to make good on them.

What are the penalties?
Beginning July 1, 2017, the following penalties will apply if unclaimed property is not submitted within time limit:
10% – Late report penalty if report is not led or paid by the due date.
10% – Assessment penalty when an examination results in an assessment for amounts unpaid or property not delivered.
5% – Additional penalty for amounts assessed and not paid by due date.
5% – Report penalty when holder does not pay electronically when required.

Note: Penalty amounts are based on amounts unpaid and the value of any property not delivered. These penalties are cumulative.