Form 1095-B
Form 1095-B is a health insurance tax form which reports a taxpayer’s type of coverage, dependents covered by the insurance policy, and the period of coverage for the immediately prior year. This form is used to verify on a tax return that taxpayers and their dependents have at least minimum qualifying health insurance coverage. Those who have health insurance that meets the standards of the law may receive Form 1095-B directly from their health care insurer and from employers who have less than 50 full-time employees (small businesses).
If taxpayers had a break in health care coverage for the tax year, they may have to pay an individual shared responsibility payment, also known as a tax penalty. Gaps in coverage of three months or less are exempt from the penalty. If uninsured for part of the year, correctly checking the appropriate boxes in Part IV will calculate the applicable penalty, if any. Uninsured individuals may still be able to avoid the penalty if they have an exemption. Exemptions are available for several reasons, including financial hardship and membership in certain groups.
You may receive a copy of Form 1095-B if your insurance provides what the Affordable Care Act classifies or defines as “minimum essential coverage.” This is the minimum level of benefits the insurance policy must provide for a taxpayer to avoid paying the penalty. The following types of insurance provide minimum essential coverage:
- Government health care plans including Medicare Part A, Medicare Advantage, Medicaid, the Children’s Health Insurance Program, Tricare for military members, veterans medical benefits and plans for Peace Corps volunteers.
- Employer-sponsored plans, including employer-sponsored coverage for retirees and “COBRA” coverage for former employees.
- Internet-based federal and state insurance insurance markets formed under the Affordable Care Act.
- Prior effective helathcare policies. Any individual health insurance policy a taxpayer had in place before the Affordable Care Act became law and took effect.
Form 1095-C
Form 1095-C merely describes what coverage was made available to an employee. A separate form, the 1095-B, provides details about an employee’s actual insurance coverage, including the individuals in the worker’s family that were covered. This form is sent out by the insurance provider rather than the employer.
The Affordable Care Act requires certain employers to offer health insurance coverage to full-time employees and their dependents. Further, those employers must send an annual statement to all employees eligible for coverage describing the insurance available to them. The Internal Revenue Service (IRS) created Form 1095-C to serve as that statement. The form identifies the employee and the employer, the months during the year the employee was eligible for coverage, and the cost of the cheapest monthly premium the employee could have paid under the plan. Every employee of an ALE who is eligible for insurance coverage must receive a 1095-C. Eligible employees who decline to participate in their employer’s health plan still receive a 1095-C.
The health care law defines which employers must offer health insurance to their workers. The law refers to them as “applicable large employers,” or ALEs. Only ALEs are required to file Form 1095-C. A company or organization is an ALE if it has at least 50 full-time workers or full-time equivalents. A full-time worker is defined as someone who works at least 30 hours a week. A full-time equivalent, meanwhile, is two or more part-time employees whose hours add up to a full-time load. If an ALE does not offer its employees insurance, the 1095-C will indicate this. ALEs that don’t offer coverage may be subject to monetary penalties.
In cases where the employer is also the insurance provider, it will also send out 1095-B forms and even send the “B” and “C” forms on one combined form. Sending out 1095-C forms became mandatory starting the 2015 tax year. Employers send the forms not only to their eligible employees but also to the IRS. Employees are supposed to receive them by the end of January. Thus, 2015 forms should be received no later than January 31, 2016.
If you are an employer or employee, and have questions or concerns about requirements related to health insurance under the Affordable Care Act, call THE TAX EXPERTS AT THE Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
