If you’ve recovered unclaimed property, the windfall undoubtedly is a source of great joy. But the smile may dim when you learn that these assets are taxable. That’s right. Uncle Sam considers unclaimed property income. And as with all income earners, you must relinquish a portion to the government. How much depends on a variety of factors.
What are the sources of taxable unclaimed property? These are many and varied. They include capital gains from stocks, interest income from investment instruments such as bonds, and newly-discovered tax refunds.
As with other income sources, certain unclaimed property may be tax-exempt. Tax-free municipal bonds and tax-free retirement plans are two examples. Such assets are on a par with conventional tax-free income sources.
Naturally, any tax-related decision must be based on legal criteria. Only a qualified professional will fully understand these criteria and know how they apply to your personal circumstances. For your protection, always consult a specialist such as your CPA or unclaimed property professional for accurate and informed guidance.
Tax Liens Don’t Prevent the Recovery of Unclaimed Property
One of the biggest obstacles to rightful recovery of unclaimed property is the defeatist attitude triggered by a tax lien. As many debtors believe, their recovered assets will be appropriated by government collectors. So why bother? Better to leave the property to their family. This is faulty thinking. The moment a beneficiary tries to cash in, the IRS will intercept all proceeds owed. There’s no escaping the tax laws.
On the bright side, tax liens often can be settled and the unclaimed property recovered, with a significant portion of the proceeds going to the rightful owner. This fact is particularly relevant to attorneys, CPA’s, estate managers, and any other professional entrusted with the management of client wealth. The solution is relatively straightforward if the value of unclaimed property exceeds the lien amount owed. In that case, recovered assets simply satisfy the debt. Owners get the remainder.
The situation becomes much stickier when the lien amount equals or exceeds the value of unclaimed property. Many owners just see the situation as futile. But it isn’t. Effective negotiation can save the day.
The goal of negotiation is to reach a lien settlement, preferably one that pushes indebtedness far below the value of unclaimed property. If successful, the owners pocket the difference. Often, this amount can be significant, with reductions sometimes reaching 50% or more.
Reaching a settlement is not exactly a cake walk. Between initial contact and final decision are countless codes, regulations, practices, and procedures that must be navigated and complied with.
As unclaimed property experts, The Argent Firm recognizes the relationship between tax liability and unrecovered assets. By skillfully managing the intricacies of Section 6325(a) of the Internal Revenue Code, we can negotiate lien settlements satisfactory to all parties. A portion of assets thereafter recovered will be used to satisfy lien indebtedness and obtain release of lean, often leaving a substantial remainder available to the rightful owner.
To learn more about our tax strategies and unclaimed property services, contact The Argent Firm at toll free 800 930-5993 or <a href=”mailto:questions@argentfirm.com”>questions@argentfirm.com</a>. Our consultants will be happy to provide additional information and answer your questions.
