What Your Clients Need to Know about 1095-A, B and C

This year marks the second year taxpayers will need to prove they have health insurance on their taxes, or else face a penalty come tax time. Employers and insurance companies are also responsible for reporting that they offer full-time employees coverage that meets “the minimum essential coverage” criteria. In addition, taxpayers may receive new forms this year.

The most important thing to tell your clients is that if they have Marketplace insurance, they will need a 1095-A to file. However, if they will be receiving the 1095-B or 1095-C forms, the majority of them won’t need it to complete the return.

Below is quick breakdown of the information on each of the forms – you can also download our ACA guides and checklists for more information.

Form 1095-A. If your client purchased health insurance on healthcare.gov or from their state Health Insurance Marketplace, they will receive a 1095-A in the mail, or can download it from their Marketplace. They will need to bring you this form in order to complete their tax return.

Form 1095-B. The 1095-B may be issued by employers with under 50 employees, or insurance outside the Marketplace, either privately or through Medicare, Medicaid or TriCare. Form 1095-B provides information about health coverage with four parts:

1. Part I identifies the person whose name is on the insurance policy.
2. Part II identifies the employer, if coverage is employer-sponsored.
3. Part III identifies the insurance company providing the coverage.
4. Part IV lists the people in their household who are covered by the insurance.

If your SMB client is not sure whether they are responsible for filing Form 1095-B with the IRS, here is a good way to check: If your client offers health coverage to its employees and it is “self-insured” (the company itself pays its employees’ medical bills, rather than an insurance company), they are responsible for the form. Otherwise, the insurance company will be responsible for the form. The company’s employees might still receive a 1095-B, but from their insurer, not the employer.

Form 1095-C. The healthcare law defines which employers must offer health insurance to their workers, referred to as “applicable large employers,” or ALEs – a company or organization that has at least 50 full-time workers or full-time equivalents. If they offered healthcare coverage to full-time employees, ALEs must report it to the IRS. The IRS will then use this information to administer the employer shared responsibility provisions and premium tax credit. If your client is an employee of an ALE who is eligible for health insurance coverage, they may receive a Form 1095-C. Even if your client is an eligible employee who declined to participate in their employer’s health plan, they will still receive a 1095-C. If a provider is an ALE with self-insured coverage, the employer reports covered individuals on Form 1095-C, instead of Form 1095-B.

The purpose of this form is to identify:

1. The employee and their employer
2. Which months during the year the employee was eligible for coverage
3. The cost of the cheapest monthly premium the employee could have paid under the plan.

According to the IRS, individual tax payers do not need Form 1095-B or 1095-C with their taxes – they just need to review for accuracy and save for their files if they receive. Note that depending on your client’s circumstances, they may receive multiple forms. Proof of health insurance coverage can also be provided on insurance cards, explanation of benefits statements from the insurer, and W-2 or payroll statements reflecting health insurance deductions.

Now that you know everything about the new forms this year, you are more than ready for any form that might be coming your way this tax season.