Unclaimed Funds

DEFINITION of 'Unclaimed Funds'

Unclaimed funds is money and other assets whose owner cannot be located. Unclaimed funds are typically turned over to the government after a specific period of time, and require the owner to make a claim in order to have it returned.

BREAKING DOWN 'Unclaimed Funds'

There are many reasons that an individual or business may have unclaimed funds, and, in some cases, may not even know that these unclaimed funds exist. A taxpayer may be owed a refund, but the refund check was returned because the taxpayer’s address changed. A bank that a business used may have failed, and the business has a small amount of unclaimed deposit. A retiree had a pension with a former employer that went out of business, but hasn’t contacted the government agency administering the pension to update his or her contact information.

Consider an individual pays estimated federal taxes over the course of a year, files his or her taxes, and requests any refund be mailed rather than wired, but then moves to a different home before refund checks are processed. If the taxpayer has not notified the tax authority, the refund check will be sent to the last known address. The check will be returned to the tax authority. The undelivered refund becomes an unclaimed fund, with the onus on the taxpayer to contact the government in order to update his or her records.

Governments offer a variety of ways to individuals and businesses to check for unclaimed funds. The Internal Revenue Service (IRS), for example, allows taxpayers to check the status of a refund online, and also offers a hotline that taxpayers can call. Because online refund portals are easier and less expensive to maintain than phone systems, governments may emphasize that the phone option only be used if a refund is several weeks late.

In the United States, the government does not have a source that taxpayers can contact in order to determine if they have unclaimed funds or property. The federal government does not maintain a centralized database for the purpose of monitoring unclaimed funds on a federal level, nor does it have information about unclaimed funds for each of the states. Individuals and businesses looking for unclaimed funds will likely have to contact the appropriate agencies in states where they live or have lived, especially if they paid taxes or owned property in those states at any point.

State and federal governments are unlikely to have the resources to contact those who have unclaimed funds, but individuals who have unclaimed funds may not be aware of this and may fall victim to scams. In some instances, such as with unclaimed pensions managed by the Pension Benefit Guaranty Corporation, the names of individuals owed money are publicly available. A scam artist may contact these individuals posing as a government employee, and will offer to help secure the unclaimed funds for a fee. This is a scam because the government does not contact individuals about unclaimed funds, and typically does not charge a fee for the return of unclaimed items.

Not all unclaimed funds originate with the government. Individuals may have unused money left on gift cards, checking account balances left with banks that are still in operation, and uncollected sales commissions with previous employers. Businesses that hold onto unclaimed property are typically legally required to attempt to locate the asset owner, but if this is unsuccessful may turn the assets over to a state or local government.