1095-A vs 1095-C: Key Differences for Health Coverage and Taxes
Understand the distinctions between 1095-A and 1095-C forms to ensure accurate health coverage reporting and tax filing.
Tax season often brings a flurry of forms and paperwork, including the 1095-A and 1095-C. These documents are crucial for reporting health coverage and can significantly impact tax filings. Understanding their differences is essential for navigating health insurance options and complying with the Affordable Care Act.
1095-A for Marketplace Coverage
The 1095-A form is issued to individuals with health insurance through the Health Insurance Marketplace. It details coverage specifics, such as policy dates, premium amounts, and any advance payments of the premium tax credit (APTC). The APTC helps lower monthly premium costs for eligible individuals and families.
A critical function of the 1095-A is its role in reconciling the APTC with the actual premium tax credit a taxpayer qualifies for based on their final income. This process, completed using Form 8962, Premium Tax Credit, may result in a refund or a repayment of excess credits. For instance, underestimating income could lead to owing money, while overestimating income might result in additional credit.
Although the shared responsibility payment penalty for not having minimum essential coverage was reduced to zero starting in 2019, the 1095-A remains relevant for historical filings and states with their own mandates. Taxpayers should verify the form’s information against their records to avoid discrepancies that could delay processing or trigger audits.
1095-C for Employer Health Plans
The 1095-C form is provided to employees who receive health coverage through employers with 50 or more full-time equivalent employees, as required by the Affordable Care Act. It outlines the months coverage was available and the cost of the lowest-priced self-only minimum essential coverage offered.
For employees, the form serves as proof of the health insurance offered and any coverage elected. This information is essential for those who may qualify for a premium tax credit if their employer’s coverage is deemed unaffordable—defined as exceeding 9.86% of household income for the 2024 tax year. Employers must complete and distribute these forms accurately to avoid penalties, which can be up to $290 per form in 2024.
The 1095-C also demonstrates employer compliance with the employer shared responsibility provisions, or employer mandate. Employers must offer coverage that meets minimum value and affordability standards to avoid penalties under IRC Section 4980H. For example, failing to provide coverage to at least 95% of full-time employees and their dependents could result in penalties of $2,970 per full-time employee beyond the first 30 if any employee receives a premium tax credit through the Marketplace.
Filing Requirements
Accurate filing of health coverage forms like the 1095-A and 1095-C is vital for compliance with tax regulations. Taxpayers should confirm that the information on the 1095-A aligns with their records, particularly entries related to premium tax credits, to avoid IRS scrutiny and potential delays.
Employees should review their 1095-C to ensure details about employer-provided coverage, such as months of coverage and affordability, are correct. This is particularly important for those exploring Marketplace options or determining premium tax credit eligibility. Employers must meet specific deadlines, such as providing forms to employees by January 31st and filing electronically by March 2nd, to avoid fines. Adhering to these timelines and ensuring accuracy is essential for both taxpayers and employers.