Does a 1095-C Help With Taxes and Reduce What You Owe?

The 1095-C form plays a crucial role during tax season for individuals with employer-sponsored health insurance. It outlines the coverage offered by employers and can significantly impact your tax filing. Understanding its details is essential, as it may influence eligibility for credits or potential penalties on your return.

Filing Requirements

The 1095-C form is not submitted with your tax return but serves as a reference, summarizing the health coverage your employer offered throughout the year. Under the Affordable Care Act, applicable large employers (ALEs)—those with 50 or more full-time employees—must provide this form to employees to comply with employer shared responsibility provisions. For taxpayers, the 1095-C verifies months of minimum essential coverage, which affects eligibility for the Premium Tax Credit. The form uses specific codes in Part II, Line 14, to indicate the type of coverage offered, while Line 16 details its affordability. These codes are vital for determining potential tax credits or penalties.

Possible Adjustments from the Form

The 1095-C form can influence your tax filing by affecting employer-sponsored coverage, eligibility for credits, and the avoidance of additional payments.

Employer-Sponsored Coverage

This form provides details about the health insurance offered by your employer. Under the Affordable Care Act, having employer-sponsored coverage that meets minimum essential requirements can exempt you from penalties. While the federal penalty for not having insurance was reduced to zero in 2019, the form still serves as verification for other purposes. If your employer offers coverage deemed “affordable” and providing “minimum value,” you may be ineligible for the Premium Tax Credit if you purchase a plan through the Health Insurance Marketplace. Affordability is assessed by comparing the employee’s required contribution to a percentage of household income, which was 9.12% in 2023.

Eligibility for Credits

The 1095-C form plays a key role in determining eligibility for the Premium Tax Credit, which helps offset premiums for health insurance purchased through the Health Insurance Marketplace. To qualify, household income must fall between 100% and 400% of the federal poverty line, and you must lack access to employer-sponsored coverage that is “affordable” and provides “minimum value.” The codes in Part II, particularly Lines 14 and 16, help determine if your employer’s coverage disqualifies you from receiving this credit. Accurate reporting is critical to avoid discrepancies that could lead to adjustments or audits.

Avoiding Additional Payments

While the federal individual mandate penalty no longer applies, some states require residents to maintain health insurance. The 1095-C form helps avoid state-level penalties by serving as proof of coverage. States like California, Massachusetts, and New Jersey impose penalties for not having health insurance, and the 1095-C can confirm compliance with these mandates. Additionally, the form can prevent the repayment of the Premium Tax Credit if you received advance payments based on an underestimated income. Ensuring the information on the 1095-C matches your tax return is essential to avoid unexpected liabilities.

Validating the Form’s Details

Reviewing the accuracy of the 1095-C form is a critical step in the tax filing process. Check personal details such as your name, Social Security number, and employer information for errors, as inaccuracies can cause mismatches with IRS records and potentially trigger audits. Verify the dates of coverage listed on the form against your personal records, as discrepancies could affect state compliance or eligibility for tax credits. If inconsistencies are found, contact your employer promptly to resolve the issue before filing your return.

Pay close attention to Part II of the form, which contains codes describing the type of coverage offered and its affordability. These entries must align with your understanding of your health plan. Errors in coding could incorrectly suggest that coverage was not offered, impacting eligibility for the Premium Tax Credit. Consult IRS guidelines or a tax professional if you need help interpreting these codes.

Dealing with Inaccurate or Missing Information

Errors or missing information on the 1095-C form can complicate your tax return. Contact your employer or the form issuer to correct inaccuracies. Employers are required to provide accurate information and should issue a revised form if necessary. Prompt communication with your employer can help resolve discrepancies quickly, minimizing disruptions to your tax filing.

Maintaining detailed personal records, including employment terms, health insurance agreements, and correspondence, can serve as a reliable reference for addressing errors. This documentation is also valuable in the event of IRS inquiries or audits. If you encounter difficulties resolving issues with the 1095-C, consult a tax professional to ensure corrective actions comply with current regulations.