What to do with uncollected paychecks?

What do employers do with uncollected paychecks which either were not picked up by the employee or were returned to the employer as “address unknown?

We recommend employers to consider the following:

  • Aside from sending certified-mails to the former employee, call the person (i.e. cell / home phone) to notify him or her that paycheck(s) have been unclaimed and document when the paycheck(s) was mailed and when the employer called.
  • Forward the check to the State Bureau of Unclaimed Property. Remember, the check is NOT the property of the employer.
  • The state holds the items for the owner or heirs until a claim is filed to collect the property. (Note: If an un-cashed payroll check is voided, the money is then available in the company’s payroll checking account. If later the funds are not available to pay the employee or to submit to the state, the employer and officers could find themselves under a breach of fiduciary responsibility.)
  • The company must report these wages on the W-2 form and pay all taxes that are due as if the un-cashed unclaimed payroll checks had been cashed on a timely basis. State unemployment reports and taxes will also need to be filed and paid as if the payroll check was cashed.
  • Consider having a company unclaimed/un-cashed paycheck policy in place.