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Understand the process for unclaimed wages

SOLVEDby QuickBooksQuickBooks Desktop Payroll14Updated 6 days ago

Find out how to handle your employee’s unclaimed wages or paychecks.

If you paid your employee and they didn’t pick up or cash their paycheck, you're responsible to report it and turn it over to your state after a period of time. The state becomes the owner of the abandoned or unclaimed wages through the escheatment process.

Escheatment varies per state. Contact your state agency to learn more.

Do's and Don'ts for unclaimed wages

As an employer, you should do the following:

  • Hold the check for the employee to claim for a period of time (maybe 1 to 5 years) before you turn it over to the state.
  • Try to contact your employee before you report any abandoned or unclaimed employee wages to your state.
  • Contact your state agency to find out what to do with the employee pay in your state.

As an employer, you shouldn't do the following:

  • Void unclaimed employee paychecks. The employee is still entitled to this money. 
  • Change the name on the paycheck to that of the state. The paycheck must remain in the employee's name.
  • Return the uncashed paychecks to your checking account. Once a paycheck is issued for wages to an employee, those funds no longer belong to the company in any way.

Escheat example

The problem: You created a paycheck for an employee on February 1, then mailed it to the employee's last known address. The paycheck was returned so you kept it to see if the employee claims it.

Finding a resolution: It's now January 20 of the following year and you still have the paycheck. You can't void this paycheck; therefore, you should check with your state for the state's escheat laws.

The solution:  You find out your state requires you to  try  to deliver the paycheck, and if returned, you must hold the check for 2 years.

Since you have held the check for almost 1 year already, you must hold it until February 1 of the next year before you can remit it to the state. Once turned over to the state,  the state will cash the check and hold the funds for the employee.

If the employee has lost their paycheck and you need to re-issue it, check out Issue a lost paycheck for detailed steps.

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