1099 Tax Software Blog

1095-B: XML Schema Validation Failed on the 1095-B typically arises when someone enters the signature, title, date on the 1094-B.  The boxes are on the 1094-B form.  But if you look in the back of Publication 5165, it says:

Is the XML data tag <p1:JuratSignaturePIN></p1:JuratSignaturePIN>
required in the 2015 Form Data File?

• Signature data are not required for TY2015.
• Do not include signature information in your XML.

For tax year 2015, do not include the signature, title, date on the 1094-B and you can avoid this XML Scheme Validation error.

1095-C: Part II on IRS Form 1095-C is Employee Offer and Coverage.  A common error arises from Boxes 14, 15 and 16 that we discuss below.

We prepare and electronically file XML files to the IRS.  For Boxes 14, 15, 16, we can efile this code

<EmployeeOfferAndCoverageGrp>
<AnnualOfferOfCoverageCd>1E</AnnualOfferOfCoverageCd>
<AnnlShrLowestCostMthlyPremAmt>128.00</AnnlShrLowestCostMthlyPremAmt>
<AnnualSafeHarborCd>2C</AnnualSafeHarborCd>
</EmployeeOfferAndCoverageGrp>

Here Annual Offer of Coverage has data and Monthly Offer of Coverage does not exist.  Another way of saying this is Boxes 14, 15 and 16 have data in ‘All 12 Months’ and January through December are blank.

We can transmit this as well:

<EmployeeOfferAndCoverageGrp>
<MonthlyOfferCoverageGrp>
<JunOfferCd>1C</JunOfferCd>
<JulOfferCd>1C</JulOfferCd>
<AugOfferCd>1C</AugOfferCd>
<SepOfferCd>1C</SepOfferCd>
<OctOfferCd>1C</OctOfferCd>
<NovOfferCd>1C</NovOfferCd>
<DecOfferCd>1C</DecOfferCd>
</MonthlyOfferCoverageGrp>
<MonthlyShareOfLowestCostMonthlyPremGrp>
<JuneAmt>97.88</JuneAmt>
<JulyAmt>97.88</JulyAmt>
<AugustAmt>97.88</AugustAmt>
<SeptemberAmt>97.88</SeptemberAmt>
<OctoberAmt>97.88</OctoberAmt>
<NovemberAmt>97.88</NovemberAmt>
<DecemberAmt>97.88</DecemberAmt>
</MonthlyShareOfLowestCostMonthlyPremGrp>
<MonthlySafeHarborGrp>
<JunSafeHarborCd>2C</JunSafeHarborCd>
<JulSafeHarborCd>2C</JulSafeHarborCd>
<AugSafeHarborCd>2C</AugSafeHarborCd>
<SepSafeHarborCd>2C</SepSafeHarborCd>
<OctSafeHarborCd>2C</OctSafeHarborCd>
<NovSafeHarborCd>2C</NovSafeHarborCd>
<DecSafeHarborCd>2C</DecSafeHarborCd>
</MonthlySafeHarborGrp>
</EmployeeOfferAndCoverageGrp>

Here Annual Offer of Coverage is blank (nothing is transmitted) and Monthly Offer of Coverage has data for specific months. All months can be filled out as well or any combination combination.

But if we transmit something like this

<EmployeeOfferAndCoverageGrp>
<AnnualOfferOfCoverageCd>1E</AnnualOfferOfCoverageCd>
<MonthlyShareOfLowestCostMonthlyPremGrp>
<JuneAmt>97.88</JuneAmt>
<JulyAmt>97.88</JulyAmt>
<AugustAmt>97.88</AugustAmt>
<SeptemberAmt>97.88</SeptemberAmt>
<OctoberAmt>97.88</OctoberAmt>
<NovemberAmt>97.88</NovemberAmt>
<DecemberAmt>97.88</DecemberAmt>
</MonthlyShareOfLowestCostMonthlyPremGrp>
<MonthlySafeHarborGrp>
<JunSafeHarborCd>2C</JunSafeHarborCd>
<JulSafeHarborCd>2C</JulSafeHarborCd>
<AugSafeHarborCd>2C</AugSafeHarborCd>
<SepSafeHarborCd>2C</SepSafeHarborCd>
<OctSafeHarborCd>2C</OctSafeHarborCd>
<NovSafeHarborCd>2C</NovSafeHarborCd>
<DecSafeHarborCd>2C</DecSafeHarborCd>
</MonthlySafeHarborGrp>
</EmployeeOfferAndCoverageGrp>

Or any combination of this code where your reporting Annual and Monthly Offer of Coverage for a particular employee, then you get the error

XML Schema Validation Failed – not well formed or missing required elements

The solution is the stay consistent.  If you are reporting Annual Offer of Coverage, then only report Annual and that means you have data in Boxes 14, 15, 16 in All 12 Months only.  If you are reporting Monthly Offer of Coverage, then report Monthly and leave Annual Offer of Coverage blank.  Stay consistent.

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.

In January, employees of large companies with more than 50 employees will receive Form 1095-C from their employer as part of the requirements of the Affordable Care Act (ACA).  If you have an employer that offers health coverage, then you will receive a copy of this form, which your employer files with the IRS.  You will receive Form 1095-C even if you decline the employer-offered coverage.

The form will have the following information:

• The type of coverage you were offered as an employee
• The lowest cost premium available
• Months of the year that the coverage was available

As an employee, you may have a question of whether you have to do anything with this form for your own income tax return.

The Purpose of Form 1095-C

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.

In some cases, employers will not offer coverage and you will have to purchase insurance on your own.  If you buy coverage through the Healthcare Marketplace, then you will also receive 1095-A to verify the coverage.

If your employer does not meet this standard and employees must purchase coverage in the Healthcare Marketplace, then the employer would be levied an Employer Shared Responsibility Payment.  This payment is essentially used to offset the tax credit that employees will receive by purchasing their own coverage, and many large employers discontinued health coverage when they discovered the Shared Responsibility Payment was less costly than providing minimum value coverage.

Form 1095-C is also used by you as an employee:

• To determine if your plan offers minimal essential coverage
• To determine your eligibility for premium tax credits

If the employer provided coverage meets ACA criteria, then you simply check a box on your tax return that you have qualifying coverage.  If you opted to purchase health coverage in the ACA Marketplace, then you will file Form 8962 to claim the premium tax credit, which can help lessen the cost of health coverage.  Please see our related blog post on Form 8962 for an explanation of how to use this form.

Employers with more than 50 employees, who provide insurance to their employees must file Form 1095-C and 1094-C.  1095-C details the health coverage for each employee, and 1094-C is the transmittal form to accompany all forms 1095-C sent to the IRS.  These forms correspond to the employer shared responsibility provisions as set out in the Affordable Care Act (ACA).  This mandate will not go into effect until tax year 2015, and as with the other ACA forms are all currently in draft form.

Affordable Coverage and Minimal Essential Value Requirements

The employer shared responsibility provisions of the ACA are designed to encourage employers to offer affordable coverage to their full-time employees.  According to the IRS, there is a test to determine if coverage is ‘affordable’:

If an employee’s share of the premium for employer-provided coverage would cost the employee more than 9.5% of that employee’s annual household income, the coverage is not considered affordable for that employee

The employer must also offer what is termed ‘minimal essential value’ in the coverage that meets certain criteria.  In other words, employers cannot shift the cost of coverage to employees, or offer a bare-bones policy to escape the ACA mandate.

Employer Shared Responsibility

If they fail to offer coverage, and an employee must then purchase coverage in the Health Insurance Marketplace, then the employer may be subject to an Employer Shared Responsibility Payment.  This payment would be due if one full time employee receives a Premium Tax Credit for purchasing coverage on their own.  The Premium Tax Credit is discussed in a previous article.   The employer payment is $2000 for a full calendar year, per employee.

However, there is another threshold to be met by employers.  They must provide affordable insurance to a minimum of 95% of their employees, or they will have to make a payment equal to an amount for all their employees even if some receive coverage.   This stiff payment requirement does have a 30-employee exclusion, so if an employer has 50 employees the payment would be for 20 employees after the exclusion is subtracted.  In effect, this shifts the tax credit from the government to the employer, but it is doubtful that it will be a very effective tool for encouraging businesses to offer coverage.  Interestingly, government employers at all levels are also subject to this payment.

As the ACA was unveiled many large, corporate employers took a look at these provisions and payments, and determined that is was less costly to simply pay the penalties and not offer insurance.  In effect, the employer shared responsibility payment is a subsidy to the government for employees who purchase insurance in the Marketplace, and then receive a tax credit.  One should look for the IRS to change these rules and formulas for employers in the future, as businesses find creative ways to minimize their health care expenses under Obamacare.