Posted on: 18 October 2017
Several aspects of the Affordable Care Act interact with federal income tax regulations. The penalty for not having health insurance is assessed on individual tax returns. As part of the implementation of the ACA, healthcare providers issue certain IRS forms to insured individuals. Although the three main forms issued to tax filers have similar-sounding names, the forms serve very different purposes.
Tax filers are sometimes initially confused to learn that there are three IRS forms in the Form 1095 series. Individuals may receive a Form 1095-A, a Form 1095-B, or a Form 1095-C. Some tax filers may even receive more than one of the forms. Individuals usually must understand the difference between the forms to know how to use their form to prepare their tax return.
Individuals who have a health insurance policy through the Marketplace should receive a Form 1095-A. Any household member included on the insurance policy is also listed on Form 1095-A. The cost of Marketplace insurance is based on an income projection, so Form 1095-A is used to reconcile the insurance cost with your actual income. As a result, tax filers with Marketplace coverage may see a slight increase or decrease in income tax.
Form 1095-B is issued to individuals who receive health insurance coverage outside of the Marketplace. Form 1095-B is typically issued by health insurance companies or government agencies that provide health coverage. Any additional insured individuals are also listed on the form, along with the months during which each individual had health coverage.
Larger employers that are required to provide health insurance to their employees issue a Form 1095-C to those employees. However, Form 1095-C pertains more to the employer than to the employee. The IRS relies on the codes entered on Form 1095-C to ensure that larger employers offer health coverage in accordance with the Affordable Care Act. Many individuals receive both a Form 1095-C and a Form 1095-B.
Over the course of a year, you may change jobs. You may decide to add or drop a Marketplace insurance policy. Each form in the Form 1095 series contains a monthly breakdown of insurance coverage for each covered individual. The ACA penalty is assessed on a monthly basis, so the monthly breakdown of coverage is essential in minimizing any potential penalty.
There are numerous exceptions to the ACA penalty, and a tax filer can claim more than one exception. Contact an accounting office like Hough & Co CPA for more information on tax preparation services.Share