Editors' pick: Originally published Jan. 31.
Even though the Affordable Care Act's future seems very much up in the air in the early days of the Trump administration, tax filers shouldn't ignore health care insurance and their tax filing responsibilities this year.
In fact, many U.S. workers will receive a tax form that directly addresses their health care insurance situation, and likely, most won't know how to handle the form's filing request properly.
The document is IRS form 1095-C, and if you have employer-based health care insurance, you may need to complete the form to Uncle Sam's specifications. "The problem is that some people are unsure why they're receiving the form, or what to do with it," says Arthur Tacchino, a health care reform expert and chief innovation officer at SyncStream Solutions, in West Chester, Pa.
More formally known as the "Employer-Provided Health Insurance Offer and Coverage" form, 1095-C stems from an ACA mandate that requires any organization with 50 or more full-time employees (or full-time equivalents) to provide tax documentation that the employee in question is enrolled in the company's health insurance plan.
"The ACA requires that almost all Americans have healthcare coverage," notes Josh Zimmerman, owner of New York-based Westwood Tax & Consulting. "The point of the 1095-C form is this - the IRS uses the information on Form 1095-C to determine whether an employee or employer have met the healthcare coverage requirements or is required to pay a fine."
The 1095 is broken down into three components, Zimmerman explains.
- Part I is the Employee and Employer Information (name, address, and other basic information for both parties).
- Part II is the Employee Offer and Coverage (the coverage offered by the employer). If you were not offered coverage from your employer, the reason why would be given in Part II.
- Part III is the Covered Individuals (information about those covered under the plan).
The form is directly geared toward those individuals who may have received a premium tax credit (often referred to as a 'subsidy') through a marketplace or exchange. "The information provided on the form may indicate that the employee should or should not have received the premium tax credit," Tacchino notes. "No matter what the case may be, it is clear that individuals should keep this tax form with the rest of their tax forms/filings."
Tax filers who aren't clear about 1095-C should refer to the form when weighing the need to check the "Health care: individual responsibility" box on their IRS tax returns, which tells the federal government you have full-year health coverage. (The check-off box is on Line 61 on IRS Form 1040; Line 11 on IRS Form 1040EZ, and Line 38 on IRS Form 1040A.)
If you're an employee who received 1095-C, the form will indicate whether you were covered by health insurance the entire year or only certain months during the year, Zimmerman says. "When you are completing your tax return and come across the question that asks if you had health insurance coverage during the past year, you will simply check "Yes" or "No" and indicate which months you did or didn't have coverage," he notes. "You don't need to do anything else with this form other than file it away with your other tax documents."
Also note that if you worked for multiple companies during the year (and were enrolled in coverage from each employer), you'll receive multiple 1095-C forms, Zimmerman adds. "If you work for an employer who has different companies, you may receive a 1095-C from each of those companies," he says.
Abby Eisenkraft, CEO of Choice Tax Solutions in New York City, says Form 1095-C provides information to the IRS to determine whether the employer owes a payment under the employer shared responsibility provisions, and also helps the employee determine his or her eligibility for the premium tax credit.
"When the employee files the 2016 tax return, this data is needed to establish who had coverage -- it may be the employee and other family members -- and for which months," Eisenkraft states.
"For example, if a single employee started a job on any day in July 2016 with medical coverage available immediately, the 1095-C from the employer would show the months of July through December checked on the form, as having coverage," she adds. "Remember - one day of coverage in a month is considered being covered with minimum essential coverage and there would be no penalty for that month."
Going forward, what's in store for Form 1095-C? "It's business as usual," Eisenkraft says.
"For now - until we hear otherwise - for the tax year 2016, the Obamacare penalty is still in place, and there will be a penalty for failure to have health insurance for any household member that doesn't meet an exception," she says.
To clarify matters, Eisenkraft offers the following bullet points to help any employee who receives a Form 1095-C from their employer.
- The 1095-C can only come from the employer. The IRS cannot provide this form.
- You can receive multiple 1095-C forms if you worked for more than one employer.
- The form is for your records and never submitted with the tax return.
- These forms are often received by taxpayers late; many times, after they have already filed.
If you receive the form, and still have questions, ask your employer or a trusted financial/tax professional for help in addressing the situation. 1095-C is a tax form that's new, and since filers aren't that familiar with it, the form can trigger confusion and angst among them.
Also, don't assume that because President Trump has made repealing the ACA a priority, you don't have to worry about any health care insurance forms for this tax year. The reality is that you do.
"Despite the politics and the hopeful expectations some people may have of replacing or repealing Obamacare, this does not negate the need to comply with the existing requirements and penalties that are in place under the current law," says Dave Du Val, chief customer advocacy officer at TaxAudit.com
Don't let any IRS headaches happen to you. Review the definitions, responsibilities, and action items above, and you'll be in full 1095-C compliance with Uncle Sam, and that's one less thing you have to worry about with your taxes this year.