1099 Tax Software Blog

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.

by

Erich J. Ruth

Erich J. Ruth provides technical support for National Software which is the parent company for 1099FIRE. 1099FIRE develops and markets a comprehensive range of products that enables any size of business or institution to effectively manage and comply with year-end filing requirements. 1099FIRE is an employee-owned company located in Phoenix, Arizona.

If you have any questions or comments about our software, feel free to contact us at any time.