The ABCs of healthcare tax forms

NUVISION Financial Corporationtony_wilson
As the rollout of the Affordable Care Act continues to unfold, taxpayers need to be prepared for a number of forms that are required when filing taxes this year. In particular, taxpayers should look for forms 1095-A, 1095-B and 1095-C that are used to show the taxpayer had medical coverage this past year, either through their employer or the Marketplace/Exchange. Below is a brief overview of what these three forms are and what needs to be done with them.

Form 1095-C The IRS requires large group employers (those with 50 or more full-time employees, including full-time equivalents, in the previous year) to provide eligible employees and the IRS with a 1095-C. The 1095-C will report information about individuals who had minimum essential coverage under the employer plan and therefore are not liable for the individual shared responsibility payment (penalty) for the months that they were covered under the qualifying plan. Employees who were eligible for the large group employer’s plan but declined or waived coverage also will receive a 1095-C reporting the declination/waiver.

Eligible employees should receive a 1095-C from each large group employer they worked for in 2015. Large group employers must furnish the 1095-C to eligible employees by March 31, 2016. The original deadline was February 1.

Form 1095-B Health insurance issuers and carriers are required to provide individuals Form 1095-B to report certain information to the IRS and to taxpayers about individuals who are covered by minimum essential coverage and therefore aren’t to pay any penalty.

Taxpayers should also receive a 1095-B from each health insurance issuer or carrier they were covered by in 2015 by March 31.

Note that employers with self-insured medical plans should issue a 1095-C to eligible employees by the deadline, not a 1095-B. In this case the 1095-C will include information combined from both forms.

Form 1095-A Form 1095-A is used to provide information to the IRS about those who enrolled in a qualified health plan through the Health Insurance Marketplace (Exchange). This form also is furnished by the Marketplace/Exchange to individuals to allow them to take the premium tax credit, to reconcile the credit on their returns with advance payments of the premium tax credit (advance credit payments), and to file an accurate tax return.

Individuals and families will only receive a 1095-A if they were covered by a Marketplace/Exchange plan at any point during 2015. Statements should have been furnished to taxpayers by Feb. 1.

Note that employees covered by a Small Health Options Program (SHOP) plan will receive a 1095-B instead of a 1095-A. Although the SHOP is a Marketplace/Exchange plan, the IRS requirement is the issuance of a 1095-B.

Small business owners — those with less than 50 FTEs, including FT equivalents — are NOT required to provide their employees with a 1095-C. Employees of small group employers must rely on the 1095-B from the appropriate source(s) to prove qualifying coverage and avoid the individual mandate penalty.

For 2015 the penalty is $325 per adult and $162.50 per child (up to $975 for a family) or 2 percent of household income above the tax return filing threshold for your filing status – whichever is greater.

Individuals and families covered by a Marketplace/Exchange plan must rely on the 1095-A to prove qualifying coverage and avoid the individual mandate penalty, unless covered by a SHOP plan.

While Form 1040 (Line 61) and Form 1040EZ (Line 11) ask about the filer’s “Health care: individual responsibility,” employees/individuals are not required to file the 1095-A, 1095-B or 1095-C with their tax returns. Self-filers would need to simply answer the question appropriately and maintain the forms with their important records should this information be needed in the future to prove qualifying coverage.

Those who work with a third party to file their taxes may find the tax preparer asking for the forms in order to complete the tax return. Individuals should be prepared to provide the tax preparer with the appropriate forms if the individual has received the forms from the appropriate source(s). However, with the issuance deadline for the 1095-B and 1095-C being pushed to March 31, it is possible an individual will want to file their tax return prior to receiving the ACA reporting forms. In this case, tax preparers should work with individuals to complete the tax filing process. Upon receipt of the forms the individual should maintain this information with their important records.