more on the IRS and apostrophes

As I mentioned earlier, when dealing with the IRS, taxpayers need to beware the apostrophe. Like George Bernard Shaw (who called apostrophes "uncouth bacilli"), the IRS apparently doesn't like them.

The IRS gives VITA volunteers a special manual helpfully telling them not to use apostrophes when entering names in tax prep software. (Pub 4012, Tab 1, page 3)

The IRS also tells its own employees to leave apostrophes out when transcribing paper returns.

As far as I can tell, it still doesn't tell the general public not to use apostrophes when preparing their tax returns.

And, apparently, this CPA didn't get the message either.

And Redwood City CPA Michael O'Connor said that when he e-filed his own 2003 tax statement, the IRS website bounced it several times. Apparently, the system would not accept the apostrophe in his name. He noted that he always had included the apostrophe on paper returns in previous years.

IRS employees never enter apostrophes in names when transcribing paper returns, according to Ted Meyer, compliance program manager for the IRS Small Business, Self-Employed Division.

It's possible that your tax-filing software will automatically reject or strip the apostrophes out for you, but it's probably safer not to enter the apostrophe in the first place.

It seems like a small matter, but a rejected e-file could delay your refund (or create even bigger head-aches like the one my husband and I experienced with our return some years ago, in which leaving the apostrophe in my name apparently convinced the IRS that my husband was claiming a non-existent spouse.)

The IRS apparently wants the letters in the name on a 1040 to match up character by character with the letters in the corresponding Social Security record, but even if your name according to Social Security records has an apostrophe, the IRS computers may have trouble processing it correctly.

The IRS apparently has no difficulty dealing with processing W-2s and 1099's containing apostrophes, but apostrophes on Form 1040 can create problems.

Of course, it goes without saying that the IRS has no problem depositing checks with apostrophes printed on them! But the refund checks it issues to us have a space where the apostrophe should be! Fortunately, my bank isn't picky.

Why the IRS refuses to spell my name correctly

My name survived the immigration authorities, but the IRS refuses to spell it correctly.

Many American immigration officers apparently took it upon themselves to enforce "spelling reform" on hapless Irish immigrants who came over to the US in the 19th century. Although double-F O'Keeffes greatly outnumber single-F O'Keefes in Ireland, the reverse is true in this country. The immigration officers apparently stripped the extra F from most of their names.

I'm proud to be a double-F O'Keeffe, like the artist Georgia, also a double-F O'Keeffe, whose name is also frequently misspelled. I like to think that we double-F American O'Keeffes were the ones with more literate immigrant ancestors who actually insisted on correct spelling in their immigration documents. (More likely, it was a matter of luck, rather than literacy, however.)

My last name was lucky enough to survive those immigration officers. It is spelled correctly on my birth certificate, my passport, and my Social Security card.

For decades, the IRS also spelled it correctly.

But about a decade ago, the IRS decided to stop spelling it correctly. (Fortunately, the bank still allows me to deposit refund checks, despite the IRS refusal to spell my name correctly.) It's not the double-F in my name that gives the IRS trouble, however. It's something else altogether.

Read on for more details, if interested.

I am very fond of my surname. It's my maiden name, which I got from my dear departed dad, which I've happily kept all my life, even though my husband and I celebrated our 30th anniversary this past summer!

My dad's full name was Richard Bennett O'Keeffe, Sr, and he proudly traced his ancestry back on both his parents' side. On his father's side, the O'Keeffe stemmed from an Irish immigrant who came over during the potato famine of the 1840s, my dad's great-great-grandfather. All I know about him was that he was a cemetery caretaker in Virginia--we have a letter commending him for his good work. My dad's mother, by contrast, was a Bennett from a large family (15 siblings!) in southern Maryland, and they could trace their ancestry all the way back to their forebear Richard Bennett, the first, last, and only Puritan governor of Virginia (1652-1655). My father was named after that Richard Bennett, and the Bennett name lives on as the middle name of one of my daughters.

But I digress. I'm rather particular about the correct spelling of my last name, which is almost always misspelled. When I was a child, my parochial school had very large classes (56 students per classroom from K to 8) and, therefore, on each Valentine's day each of us received 55 mandatory valentines from our classmates. In the early years, it seemed that my name was spelled 55 different ways on those handwritten valentine envelopes (O'Keeffe, O'Keefe, O'Keefee, O'Keesse, O'Keith, O'Keef, Keefe, and more variations along those lines.) Given the age of my classmates, and the fact that they were required to write out 55 envelopes, it's not too surprising that they didn't take too much care. After all, scholars say that even Shakespeare was erratic in the spelling of his own name.

Precisely correct spellings mattered little in those elementary school days, however. All the spellings were close enough that they reached their intended destination. There were, after all, only 56 students in my class. About half of the girls seemed to be named "Mary" but none of the other Marys had a surname anywhere close to mine.

Precisely correct spellings make a lot more difference in these digital days. One letter astray can result in a total mismatch, with all kinds of ensuing identity confusion problems. Many email systems I have used assign email addresses based on last name and a correspondent who misspells my name in that address may not understand why his emails are not reaching me. As a result, whenever possible, I encourage my correspondents to use my alternative addresses in gmail or yahoo, which have nothing to do with my last name, and which are therefore much easier to remember and spell correctly.

Now, what about the IRS? In general, the IRS stresses that last names should match Social Security records. This can be a problem for some married women, who file under a married name, but who don't bother to update Social Security records.

However, it shouldn't be a problem for me. As mentioned above, I've kept my maiden name for my entire life, so I have a single consistent Social Security record. I started filing tax returns as a single person in the 1970s. The IRS had no problem digesting my tax returns then. In 1979, I got married and started filing joint returns with my husband, continuing to use my maiden name. No problems at first. In the early 1990s, we switched from doing our tax returns by hand to using computer software. Still no problems for quite a few years.

Then, out of the blue, about 10 years ago, after trouble-free joint return filing for twenty years of our married life, my husband got a letter from the IRS asserting that he was ineligible to file a joint return because the name of his spouse of the tax return did not match up with the spouse SSN in Social Security records. As far as the IRS was concerned, his "spouse" listed on the tax return did not exist, and the IRS was threatening to change his filing status to single and bill him for extra tax.

Well, of course, the first thing we did was to go to our files to look at our copy of our joint tax return in question. Of course, my name and SSN were listed correctly on our tax return, and it was exactly the same spelling as we had used on all previous years' tax returns. (In fact, our tax prep software had automatically pulled that information verbatim from prior year's returns, which had previously been accepted without question.) And I pulled out my Social Security card to double-check it. Sure enough, Social Security had spelled my name correctly on my card, issued back when I was a teenager. Everything looked letter perfect.

So why was the IRS computer suddenly deciding that my name and SSN didn't match? It was a total mystery to us at the time, but we wrote back to the IRS, enclosing a copy of the first page of our tax return, along with a copy of my Social Security card, and a copy of our marriage license, and we heard nothing further from them, so I guess they eventually decided that everything was in order after all. We have filed joint returns, unchallenged by the IRS, ever since.

Eventually, I began to strongly suspect that the problem was IRS computer indigestion: it couldn't handle the apostrophe in my name. Mail, including refund checks, from the IRS ever since that year shows up without the apostrophe in my name.

In 2005, while I was preparing to become a VITA site coordinator, I finally got some confirmation for my "apostrophe indigestion" theory.

VITA volunteers get a special manual (Pub 4012), which very helpfully tells us that there are certain special exceptions to the "Spell the name exactly as it appears on the Social Security card" rule. One of those exceptions is for apostrophes. Apparently the IRS software can't deal with apostrophes, so you are supposed to leave apostrophes off your 1040. Page 3 of Tab #1 of the Pub 4012 provides the helpful example that a person with a Social Security card reading "John David O'Willow" should be entered as "JOHN D OWILLOW" in tax software.

I have no idea why the IRS computers suddenly stopped being able to digest an apostrophe, nor why they don't bother to explain this fact to ordinary hapless taxpayers.

Of course, George Bernard Shaw would certainly approve of the IRS refusal to deal with apostrophes. He famously disliked apostrophes, calling them "uncouth bacilli." It was part of his general campaign for simplifying spelling.

The spelling reform movement was even stronger in the US than in England. One of my maternal ancestors, Noah Webster (of dictionary fame) was an early proponent--which brings us back to those American immigration officers who stripped the redundant F's from hapless O'Keeffes wanting to enter the country.

The IRS computers will apparently let me keep my double-F, but they won't let me keep my apostrophe!

Illustration credit: image above was created in http://www.wordle.net/create

Fourth commandment: thou shalt enter each and every box of thy taxpayer's W-2 data faithfully and verbatim.

Fourth commandment: When thou usest tax software, thou shalt enter each and every box of thy taxpayer's W-2 data faithfully and verbatim.

There is a lot of important tax information embedded in a W-2, including some mysterious items that may not be obvious at first glance, so whenever you use tax software, you need to create a faithful verbatim electronic copy of the data in every box of the W-2.

If you do that meticulously, TaxWise should do the work of putting everything in the correct place on the Federal 1040 and NYS IT-201 tax forms, but it's important to understand WHAT you are doing and WHY you are doing it.

A few important observations:

0) "Verbatim" is a slight exaggeration: you are allowed--and encouraged!--to round dollar amounts to the nearest whole dollar.  Also, the IRS computers are apparently allergic to punctuation, so do not include it.  (E.g., if the taxpayer or employer's name has an apostrophe in it--like mine--leave it out.  Otherwise, as I learned the hard way a decade ago, you run the risk of giving the IRS computers a bad case of indigestion.)

1) Not all W-2s are laid out in exactly the same way. Some W-2s are vertical, some are horizontal, some are large, some are small. What is key is matching up the box numbers, box by box.

2) Be VERY careful to distinguish the words employEE from employER. A common source of problems is mixing up the employEE SSN with the employER tax ID number, or the employEE address with the employER address. (I'm capitalizing those letters distinctively for emphasis here, but the W-2 provides no such help.)

3) Those mysterious letters and codes in Boxes 12 through 14 give important information about contributory retirement plans (e.g., 401(k)'s) and other fringe benefit compensation that may have special tax treatment. As an example, let's consider Quincy Bennett's W-2 above from the IRS Pub 4491W workbook. (You can click on the image to see a larger and clearer view.)

Mr. Bennett's W-2 shows in Box 12a that he contributed $531 to his traditional 401(k) plan at Luther Petroleum. (How do I know that? The mysterious Code D in Box 12a. You can read more about what W-2 codes mean here.) That contribution reduced his wages subject to income tax in Box 1 by $531, but it did not affect his Box 3 and Box 5 wages for Social Security and Medicare payroll tax purposes. It also reduced his Box 16 wages subject to state income tax by $531.

4) The information in Box 2, federal withholding, and Box 17, state withholding, is especially important! It is literally "money in the bank," because it represents money that the employer has withheld from the employee's pay that needs to be credited against his federal and state tax liability. If you accidentally omit that data input (it's especially easy to overlook the Box 17 information), you can literally give your poor taxpayer a heart attack by wrongly telling him he owes a lot of money, when in fact, he actually owes much less or may even be entitled to a refund.

5) UPDATE:  The Advance EIC is no longer an option.  It was eliminated 10 years ago.  Few taxpayers chose it (for reasons we will discuss in class) and it created more trouble than it was worth for some of those who did. A frequently overlooked item: "Advance EIC payment" in Box 9. For example, see Ms. Colby Bennett's W-2 below. (Again, click on the image for a clearer view.) There is $1,200 in Box 9. That tells me that me that--at her request, her employer, the William School District, included $1,200 of Advance Earned Income Credit (EIC) payments in her paychecks during the year. Effectively, her employer gave her an advance on part of her refund, and that advance needs to be subtracted from the refund she will get at the end of the year. If you enter the Box 9 information into the electronic W-2 in TaxWise, you should check to make sure that TaxWise puts that number into line 59 on the 1040.



In effect, "Advance EIC" is a form of negative withholding. This complication rarely happens in real life--only about 1% of EIC recipients choose to collect some of it in advance, but when it does happen, it is essential to take it into account! It comes up far more frequently in IRS workbook exercises (and maybe the the certification exam!) than in real life. In the interests of tax simplification, the provision for Advance EIC is ending with the 2010 tax year, so this should be the last year we need to worry about this.