Wednesday, January 28, 2015

Note to States: The DMF is Not Infallible

Since the widespread audits of life insurance companies' unclaimed property compliance became public knowledge in 2011, there has been copious ink spilled on discussion regarding the Social Security Death Master File.  The macabre-sounding index is not the central plot point of a horror movie, it is a database file maintained by the Social Security Administration that tracks deaths reported to the SSA.  That information, in turn, is used for a number of purposes by government agencies and private industry. 

In more recent years, the DMF has also become a new (if controversial) tool of unclaimed property auditors and states seeking to recover property that does not otherwise meet the black-letter presumption of abandonment set forth in state unclaimed property laws.  (The propriety of such a practice is a topic for another day).  At a minimum, however, Fox has an article that proves that resort to the DMF is not panacea for the states or holders. According to Fox, a 94 year old Ohio man is being stopped from filing his taxes because the IRS thinks he's dead.  The culprit?  According to the article, the reason that the IRS refused to accept the return "was because the filer was dead according to the Social Security Administration."

While similar errors can likewise happen with holder records, the article is a reminder that no test or tool is infallible, and generalizations made by auditors and states during the audit process are just that -- generalizations that must always be subject to rebuttal.   

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