1099 Tax Software Blog

IRS Form 1095-B is used to verify that an individual has ‘minimal essential coverage’ under the mandates of the Affordable Care Act (ACA).   Once you receive the form, you may wonder if you have to do anything with it under the new rules, and how it affects your income tax return.

1095-B:  Verification of “Minimum Essential Coverage’

Form 1095-B is prepared and filed by any entity that provides health coverage, so it is possible for you to receive the form from a small employer, government entity or individual insurance company that is not a part of the ACA Healthcare Marketplace.  (Marketplace health plans are reported separately on Form 1095A, and those plans automatically meet the ACA minimums.)

The reason that you receive the Form 1095-B is to verify that your healthcare plan meets the minimum coverage requirements established by the ACA.  If the coverage is inadequate and does not meet ACA criteria, then you will have to pay a penalty, also known as the Shared Responsibility Payment under Obamacare.

Because of this, Form 1095-B is important to retain for your records in the event there is any question about the scope of your health plan’s coverage.  You will notice that you are listed as the Responsible Individual (Policy Holder) on the form, even if you did not directly purchase the coverage (such as with employer plans.)  Also, your dependents are listed on the form as part of your coverage.

What If My Health Plan Does Not Provide the Minimum Coverage?

Just because you receive Form 1095-B does not mean that you meet the ACA minimums.  Form 1095-B simply reports the coverage, and even breaks it down by the month to verify that you had coverage for the whole tax year.  Any breaks in coverage of less than three months are not penalized.  If you bought insurance yourself, you can simply ask your insurer if the plan is ‘ACA compliant’, and any plan purchased prior to Obamacare will qualify.  Medicare and Medicaid also automatically comply with ACA minimums.

The penalty for an individual for tax year 2015 is $325 or 2% of income, and so there is good reason to check if your plan meets ACA minimums.  There are also exemptions available such as hardship or disability, which may relieve you of paying the penalty.

The next stage of required documentation under the Affordable Care Act (ACA) will begin at the end of this year.  Until now, many of the forms have been optional, but starting this year they are required, and you may receive one or more of these new forms by January of next year for tax year 2015.

The question for many individuals and business owners is:  what is the proper action to take when you receive a copy of one of these forms in the mail?

1095-A: Verification of Health Coverage

If you purchased a health coverage plan yourself through the Health Insurance Marketplace, then you will receive a copy of Form 1095-A, which is filed by the Marketplace.  This copy of Form 1095-A is important because it is your proof that you have complied with coverage requirements of the ACA mandate for health coverage, so be sure to keep the copy with your tax records.  Compliance is mandatory, and if for some reason you cant show proof of adequate coverage there are penalties.  You do not have to file the copy with your return, since the IRS already has a copy.

However, there are a few ways that you can use this form:

1. First, make sure that the information on the form is accurate, including coverage dates, premiums paid and extent of coverage.

2. You may use the form to compute and obtain a premium tax credit, if you qualify.

The premium tax credit is available to individuals who purchased health coverage through the Marketplace and meet certain criteria such as:

• Not eligible for employer of government health plans
• Are within certain income limits
• Cannot be claimed as a dependent by another person
• Do not use filing status Married Filing Separately

3. If you already chose to receive the premium tax credit as a reduction in payments to the insurer, you can use the form to accurately file your tax return based on those payments. Because the credit is computed using a formula based on income, your final annual income will affect whether the payments were adequate.  The amount of the credit is determined by income level, with lower income households receiving a larger tax credit than high-income households

In some cases, you may receive a refund, and for others the payment reductions may have been too much if their income was higher than projected.  For this reason, Form 1095-A is an essential form to pay attention to if you purchased insurance through the ACA Marketplace and want to make sure you receive the correct credit or refund.  Form 8962 will be used to actually claim the premium tax credit on your tax return, using the information from Form 1095-A.