Do You Have to File a 1095-C With Your Taxes?
Understand the role of Form 1095-C in tax filing, its issuance by employers, and how to manage missing or incorrect forms effectively.
Tax season often brings a flurry of paperwork, and understanding which forms are necessary can be confusing. Among these is the 1095-C form, which relates to health insurance coverage provided by employers. It plays a role in demonstrating compliance with the Affordable Care Act’s (ACA) requirements.
When Employers Issue This Form
Employers with 50 or more full-time employees, known as Applicable Large Employers (ALEs), are required by the ACA to provide the 1095-C form. These employers must offer health insurance that meets minimum essential coverage standards. The form is typically distributed by January 31 of the year following the coverage year. For example, for 2024 coverage, employees should receive the form by January 31, 2025. This timeline aligns with other tax documents like W-2s, ensuring employees have the necessary information to complete their tax returns.
The form details the health insurance coverage offered, including the months it was available, the type of coverage, and the cost to the employee. This information helps verify compliance with the ACA’s individual mandate. While the federal penalty for not having insurance was reduced to zero in 2019, some states, including California, Massachusetts, and New Jersey, have their own mandates and penalties, making the 1095-C relevant for state tax purposes.
Whether This Form Is Mandatory
The 1095-C form is not required to be filed with your federal tax return. Its primary purpose is to inform you about the health insurance coverage your employer offered. However, the information may be relevant for state tax filings in states enforcing individual mandates.
This form is also useful for reconciling discrepancies between the coverage offered and your reported health insurance status. It may be important if you are applying for premium tax credits or subsidies through health insurance exchanges, as it verifies the coverage offered by your employer. For states with health insurance mandates, the 1095-C may be necessary to demonstrate compliance with state laws.
Handling Missing or Incorrect Forms
If your 1095-C form is missing or contains errors, contact your employer’s human resources or payroll department. Employers are responsible for issuing accurate forms as required under the Internal Revenue Code Section 6056, which mandates timely and accurate reporting of health coverage information.
If your employer is unresponsive, you may need to contact the IRS. While the form is not required for federal tax filing, discrepancies can create complications for state tax obligations. Document your communications with your employer and retain any correspondence as evidence of your efforts.
If the issue cannot be resolved before filing taxes, use the information you have to complete your return. Be prepared to amend your return later if needed, using Form 1040-X. Consulting a tax professional is advisable in such cases.
Filing vs Retaining
Although the 1095-C does not need to be filed with your federal tax return, retaining it is advisable. Keeping this form ensures you have access to the information in case of discrepancies or inquiries from state tax authorities. The IRS recommends keeping tax documents for at least three years, which aligns with the statute of limitations for most audits.
Retaining the 1095-C can also help track trends in employer-provided benefits, such as changes in coverage costs or options. This can assist with decisions about health insurance or provide clarity if employment-related disputes arise. Maintaining a digital archive can improve organization and accessibility.
IRS Enforcement Approach
The IRS enforces compliance with ACA reporting requirements, including the 1095-C form, through automated systems and manual reviews. The agency examines employer-submitted data to identify discrepancies or non-compliance, using information from various sources.
Employers who fail to furnish the 1095-C or provide inaccurate information can face penalties under Internal Revenue Code Section 4980H. These fines are calculated based on the extent of non-compliance. The IRS also provides educational resources to encourage voluntary compliance.
In recent years, the IRS has enhanced its enforcement efforts by using data analytics to detect patterns of non-compliance. This targeted approach streamlines audits and minimizes burdens on compliant employers. For employees, discrepancies in employer reports may trigger IRS notices or requests for additional information, even though the 1095-C is not filed with tax returns.