IRS 1095: Everything You Need to Know
IRS 1095 determines if a person needs to comply with the shared responsibility payment for not having health insurance under the Affordable Health Care Act.4 min read
IRS 1095: Everything You Need to Know
The IRS 1095 determines if a person needs to comply with the shared responsibility payment for not having health insurance under the Affordable Health Care Act, also known as Obamacare. There are three versions of the IRS Form 1095:
People who have purchased insurance from the health care marketplace use the information from the forms to see if they have to pay money to the IRS or receive an additional premium tax credit during tax season.
Shared Responsibility Payment: What Is It?
If there is a three-month or more gap in qualifying insurance coverage for you or your dependents, you could be required to pay an individual shared responsibility payment. Your income tax return has this information reported on it from what you share with IRS and information found on the 1095 forms. You could be exempt from the payment if you are part of a group the Internal Revenue Service explicitly exempts from participating in the Affordable Care Act, the coverage gap is three or fewer consecutive months, and there are no affordable health plan options offered by your employer.
Who Receives the 1095-A Form?
The 1095-A form is a health insurance marketplace statement. So, if your insurance company participates in the healthcare exchanges, then the company will provide you with one. You take the information given on the form to help you complete your income tax filing, claim any due premium tax credits, and adjust any tax credit payments.
The form includes the following information:
- Your name
- Amount you paid for coverage
- Cost of your plan
- Whether credits were used to pay for insurance — the Health Insurance Marketplace Statement is necessary for claiming advanced premium tax credit payments (APTC) on your federal tax return if they got applied to your insurance premiums.
- Entitlement to any tax credits — reconciles APTC payments on the IRS Form 8962 which, in turn, gets used for a comparison of how much tax credit you used in the previous year to what you qualify for when you file.
You could receive more than one Form 1095-A. You will receive one for each private health plan that you or your household had enrollment in throughout the year. You could receive multiple Form 1095, as if any of the following applies:
- Members of your family have different plans
- Members were removed from or added to insurance during the year
- You changed plans mid-year
The form not only helps you report your health insurance coverage, it also allows you to report any financial help you may have received the previous year. Financial support could have been in the form of an advanced premium tax credit. The back of Form 1095-A has more information about how to use the information from the form to complete IRS Form 8962. For any advanced premium tax credit paid on your behalf or for someone else in your household, you are also required to file your income tax return with Form 8962 for the year that the APTC was received. Not filing a return will make you ineligible for future APTC and cost-sharing reductions.
Entering the information from the form is easy. It is just a matter of answering easy-to-follow questions.
The Purpose of Form 1095-B
If you work for a company that has less than 50 full-time employees, your employer will send you Form 1095-B. An insurance company that does not participate in the marketplace may send out this form, as well. The Form 1095-B outlines the period of your coverage, any dependents you covered, and the type coverage. The form gets used to verify if you and your dependents have at the least, Minimum Essential Coverage (MEC). If there was a break in health coverage for the tax year, an individual shared responsibility payment might need to be paid.
Form 1095-B is not required for you to file your taxes. It is for your records and is your proof of qualifying health coverage. Therefore, it is important that you keep it along with your other tax documents.
An Explanation of IRS Form 1095-C
Available employer-provided health insurance and whether you participated in the provided plan for the fiscal year gets reported on Form 1095-C. The form is sent out by companies that have 50 or more full-time employees or employees with full-time equivalence. The key aspect of 1095-C is to report if you took advantage of the insurance made available to you. Just like with Form 1095-B, this form is significant in proving if you had minimum essential coverage under the Affordable Health Care Act.
How Much Is the Penalty for Not Having Coverage?
Due to the federal healthcare reform, most individuals are required to have qualifying healthcare coverage. If you do not have MEC, then you are responsible for paying the Internal Revenue Service a federal tax penalty. The shared responsibility payment is the greater of 2.5 percent of your household income or $347.50 per child and $695 per adult up to $2,085 for a family.
Are There Programs That Do Not Qualify as Minimum Essential Coverage?
If you receive health coverage from certain programs, it may not qualify as minimum essential coverage, or certain persons may be exempt. In some cases, they may still receive a version of Form 1095 from the marketplace, an employer, or Medicare. Some of these programs or persons may include the following:
- Specified Low Income Medicare Beneficiary
- Medicare Savings Programs
- Qualified Disabled and Working Individuals
- Qualified Medicare Beneficiary
- Qualifying Individual
- Old Age Pension-Health Care Program
- Low-Income Subsidy for Medicare prescription drug coverage
If you need help with IRS 1095, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.