Dear Tom and Alan:
Man, do I hate taxes! I was just told I need a form 1095-A to give to my tax preparer in order to fill out another form in order to begin to complete my tax return!
It’s always a pain in the neck this time of year, but what the heck is going on?
Tom: Here goes. There are three 1095 forms: 1095-A for individuals going through a health care exchange, e.g., Covered California; 1095-B for employers with less than 50 employees; 1095-C for employers with more than 50 employees. So our reader has to worry about only one of them.
According to the Covered California website: “Your 1095-A shows the amount the Internal Revenue Service (IRS) paid to your insurance company in 2015 to help you with the cost of your health coverage.”
Al: That last statement really took me back. I knew the ultimate enforcer of the Affordable Care Act (ACA) was the IRS, but I’d never heard it worded that the IRS “paid your insurance company.”
Boy, if a conservative is a liberal who got mugged, how about one who got audited? But wait, there’s more!
Tom: The 1095-A form is used to complete IRS Form 8962 which is then filed with your return. 1095-A is similar to a W-2.
A cornerstone of the ACA is the Shared Responsibility Payment, which is what an individual may have to pay for not having health insurance. Most people know by now that the penalty for not having insurance has been going up each year.
Al: Here’s how they describe it on the Turbo Tax website: “Any gap in qualifying insurance coverage of three months or more for you or your dependents can require you to pay an individual shared responsibility payment. This information is reported on your income tax return and is obtained from the information you provide and that provided on 1095 forms.”
Insurance companies with Covered California are to provide individuals with the 1095-A form. You put your name, type of coverage, tax credits, if any, and amount you paid.
Tom: Covered California for Small Business (originally called SHOP) requires participating insurance companies to provide employees with form 1095-B so that they can give the information to their tax preparers regarding type of coverage, dependents covered, and the time frame of the coverage.
The latter is to verify that the employee and dependents have had no break in coverage that could result in an individual shared responsibility payment. Additionally, each person must have at least Minimum Essential Coverage (MEC) to avoid penalties.
Al: I tried to find a definition of MEC. Don’t bother. It does give a list of what is not MEC.
Finally, form 1095-C for large group employees, covers information on the employer’s plan and whether or not the employee chose to participate.