1099 Tax Software Blog

The Affordable Care Act has new filing requirements for tax year 2015 that apply to businesses offering health coverage. Not every employer offers health insurance, and some businesses are not required to file 1095-C and 1095-B. For this reason, it is helpful to review the guidelines for filing these new tax forms.

IRS Form 1095-C

Essentially, Form 1095-C is the method for large employers to demonstrate that they have met the ACA requirement of offering affordable coverage to their employees. Policies must be affordable and offer minimal value under ACA criteria, or the employer will face penalties.

IRS Form 1095-B

Form 1095-B is used to verify that an individual has ‘minimal essential coverage’ under the mandates of the Affordable Care Act (ACA). Form 1095B is prepared and filed by any entity that provides health coverage, including employers, and then the employee receives a copy to file with their own tax return to verify coverage.

Who Must File?

The criteria for filing can be determined by answering the following questions:

• Do you have more than 50 full time employees? (large employers)

If yes, are you self-insured? If yes you are self-insured, you must file form 1095-C, Parts I, II, and III. If no, you still file the form, but only Parts I and II.

• If you have less than 50 full time employees, but you are self insured, then you will have to file Form 1095-B, Parts I,II and IV.

In general, employers with less than 50 employees who are not self-insured do not have to file either Form 1095-B or 1095-C.

The forms are filed with the IRS, but each employee must receive a copy to file with their tax return, as a means of verifying that they have the minimum coverage required by the ACA. There are penalties that fail to supply accurate copies to employees, so this is an important aspect of the filing requirements for employer.

One form is filed for each employee, and then the employer will submit all the forms with one transmittal form, either Form 1094-C or 1094-B. This time consuming process for businesses is only one of the effects of the ACA, and requires a time investment for correct preparation, or the use of outside tax preparation services.

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.

Another new tax form required for entities that provide health coverage for individuals under Obamacare is Form 1095-B.  This form is used to verify that an individual has ‘minimal essential coverage’ under the mandates of the Affordable Care Act (ACA).  This coverage is referred to as the individual responsibility requirement under ACA, which requires either purchasing or receiving health coverage, or face paying a penalty.  Although ACA is a health care directive, the penalty and coverage verification have been left to the IRS as the agency with the ability to both track and collect the penalty using tax returns.

The penalty aspect of ACA was controversial, but this is the way that Obamacare mandates that every individual have coverage.   The penalty is minimal the first year, but increases steadily each year to equal the cost of mid-level health plan in the Marketplace.  This form, submitted by the entity that provides the coverage, will demonstrate that a taxpayer had fulfilled the requirement and would avoid the penalty.  Therefore, anyone who receives a copy of this form should retain it to verify that they have complied with the mandate.

The types of coverage that could be reported on the form include:

• Small Business Health Options Program
• Employer sponsored coverage
• Government-sponsored program
• Individual market insurance
• Multi-employer plans

The form is actually filed by the entity that provides the coverage, and then the Responsible Individual (Policy Holder) listed in Part I will receive a copy of the form for their records.

Part II is for Employer Sponsored Coverage, and Part III is for other Issuers or Coverage Partners.

Part IV has multiple spaces for Covered Individuals where there may be several family members under the same plan.

There are also boxes that indicate the number of months of coverage for the calendar year.  There is an additional form that must be filled out for employers that provide coverage, the 1095-C, which I will discuss in another article.

Form 1094-B

Form 1094-B is simply the transmittal form that will accompany all 1095-B forms that are filed by one employer or provider of coverage.  For instance, if an employer provides coverage they would send separate 1095-B forms for each employee, but only one 1094-B as the transmittal form.  It is simple to fill out and poses no real challenges for the filer.