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  • unclaimed funds

    I received a notice that I have $611 in unclaimed funds in a state which I no longer reside.   It appears to be a check from a health insurance company which went to my old private practice which has since then dissolved.   It was issued in 2011.   If I claim it, do I have to report it as income?  Do you think that it will be a trigger for an audit if I do not file it as income?   Will I have to file a state tax return for the state it was issued in?   I'm tempted just to leave it there if it means that I will have to file an additional state's taxes or it will mess up my prior returns.

  • #2
    If it's income yes.

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    • #3
      I had a similar minor windfall a few years ago. It’s income, so yes, you have to report it as such.

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      • #4
        You can check with a CPA but I would imagine you'll report it as income the year you claim it. It would be ridiculous for the IRS to expect you to go back and amend taxes for this. I mean, there's nothing else hiding in your return that would make you fear an audit, is there...?

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        • #5
          Income is reported in the year received, right? But Nephron might still have to file an additional state tax return this year if he has moved to another state. At $25 or so per state return, that seems reasonable. The software will sort out the offsets among states.

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          • #6
            Originally posted by Antares View Post
            I had a similar minor windfall a few years ago. It’s income, so yes, you have to report it as such.
            This is not typical. Cannot address the specifics as don’t know the situation, but unclaimed funds are usually an asset that is waiting for the owner to receive. Income is reported in the year paid, whether you cash the check or not.
            Financial planning, investment management and CPA services for physicians, dentists, and medical professionals | 270-247-6087

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            • #7
              This should not be taxable. Income is reported in the year paid, whether you cash the check or not. Should have rec’d a 1099 from health insurance co in the year paid and have been reported on the 2011 tax return (which is now out of the SOL, btw). Even if you’re cash basis, the transaction is recorded when made, not when cashed. If the business did not report it, that’s on the business, not you. And the business is defunct and the SOL has tolled.

              Think about it like this: your employer issues a paycheck which you lose and is not cashed. Regardless, the employer reported the income on your W2 for that year - they have no way of knowing when issuing W2s whether you have cashed a check or not.

              This is not the best example b/c paychecks don’t typically fall under unclaimed funds but it’s the principal I’m trying to illustrate. Another example would be an inheritance, which probably is where most UFs originate. Inheritances are not taxable, just an asset received by the beneficiaries.
              Financial planning, investment management and CPA services for physicians, dentists, and medical professionals | 270-247-6087

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