The Affordable Care Act (ACA) creates a mandate of a minimum level of health coverage for most individuals, and the IRS is the agency that is charged with enforcement. As a result there are several new tax forms that you may receive this year, which detail the type and scope of your health coverage. These forms have been optional until this year, but now are mandatory for tax year 2015.
Although similar, these forms have varying purposes for those filing their taxes. This is a quick overview of each form, and you can find greater detail on the other blog posts for each specific form.
Form 1095-A: Verification of Health Coverage
This form is used to document that you purchased a health plan through the ACA Healthcare Marketplace, and that you have met the requirements for health coverage. It can also be used to calculate whether you are entitled to any premium tax credits for purchasing coverage.
Form 1095-B: Verification of “Minimum Essential Coverage’
Form 1095-B is used to verify that any non-ACA Healthcare Marketplace policies meet the ACA standard of ‘minimum essential coverage.’ If you plan does not meet minimum standards then you will have to pay a penalty, known as the Shared Responsibility Payment.
Form 1095-C: Minimal Essential Coverage by Large Employers
Employers with more than 50 full time employees will file this form and employees will receive a copy. Form 1095C is the method for large employers to demonstrate that they have met the ACA requirement of offering affordable coverage to their employees. If they do not offer adequate coverage, and employees must purchase insurance in the Healthcare Marketplace, then employers will pay a penalty.
How to Use the Forms
Depending on whether you purchased insurance yourself, or received it from an employer, you may receive a copy one of these forms by January 31, 2016. The forms are filed by the entity that provides the coverage, either an employer, government agency, insurance company or Marketplace provider.
You will use the copy that you receive to verify coverage and apply for any tax credits that may be available. If you have adequate coverage, then you will simply check a box on your income tax return. If you are applying for a tax credit, then you will fill out and file Form 8962 using the information that is on Form 1095-A.
Also, if you do not purchase any insurance coverage, then you will pay a penalty on your income tax return, which is similar to any other tax liability. The penalty for an individual for tax year 2015 is $325 or 2% of income.
