What Is Form 1095 and How Does It Impact Your Taxes?

Tax season brings a flurry of paperwork, and among the forms taxpayers may encounter is Form 1095. While it may not be as familiar as other tax documents, it plays a key role in reporting health insurance coverage. Understanding its implications ensures compliance with tax regulations.

Form 1095 provides details about your healthcare coverage for the year, verifying whether you meet the requirements under the Affordable Care Act (ACA).

Purpose in Tax Filing

Form 1095 is used to verify health insurance coverage under the ACA, which required individuals to maintain minimum essential coverage. Although the federal penalty for not having adequate health insurance was reduced to zero in 2019, the form remains relevant for state-level mandates that may still impose penalties. The IRS also retains it for informational purposes.

The form comes in three variants—1095-A, 1095-B, and 1095-C—each reflecting different sources of health coverage. Form 1095-A, issued by the Health Insurance Marketplace, is crucial for taxpayers who received premium tax credits. It provides the necessary details for reconciling these credits on Form 8962. Form 1095-B, typically sent by insurance companies or small employers, lists the months of coverage. Form 1095-C, provided by large employers, outlines the coverage offered, including whether it meets ACA affordability and minimum value standards.

Key Data on the Form

Form 1095 includes specific data points critical for taxpayers and the IRS. Each variant reflects the nature of the health coverage provided. Form 1095-A details the policy issuer, coverage dates, and premium amounts, all of which are essential for reconciling premium tax credits with actual income. Accurate reconciliation ensures taxpayers receive the correct credit amount, avoiding additional tax liabilities or adjustments.

Form 1095-B and 1095-C focus on coverage months and plan details. Form 1095-B, issued by insurers, verifies continuous coverage, which is important for states enforcing health coverage requirements. Form 1095-C, provided by large employers, specifies the type of coverage offered and whether it meets ACA standards. For employees, this information helps determine eligibility for premium tax credits if they opt for marketplace coverage instead of employer-provided plans.

Different 1095 Variants

The three variants of Form 1095 serve distinct purposes based on the source of health coverage. Form 1095-A, issued by the Health Insurance Marketplace, is vital for individuals enrolled in marketplace plans. It includes monthly premium amounts and advance premium tax credits applied, which are used to complete Form 8962 and reconcile tax credits. Discrepancies on this form can lead to adjustments in tax liabilities or refunds.

Forms 1095-B and 1095-C address employer-sponsored plans. Form 1095-B, issued by insurers or certain employers, lists the months an individual had minimum essential coverage. This is particularly relevant in states with health coverage mandates, as noncompliance can result in penalties.

Form 1095-C, issued by Applicable Large Employers (ALEs), provides details about the coverage offered, its cost to the employee, and whether it meets ACA affordability standards. This information helps employees determine eligibility for premium tax credits if they choose a marketplace plan over employer coverage. The affordability threshold for 2024 is 9.12% of household income.

Steps for Including It in Your Return

To include Form 1095 in your tax return, first ensure you receive the correct variant by the IRS deadline, typically January 31. Verify all details for accuracy, including names, Social Security numbers, and coverage months, as errors could trigger IRS inquiries or impact your tax outcome.

For Form 1095-A, use the information to complete Form 8962 to reconcile premium tax credits. Misreporting could lead to additional taxes or reduced refunds. For Forms 1095-B and 1095-C, while these are not submitted with your return, they serve as documentation in case of audits or state-level health coverage requirements.

Correcting Errors or Discrepancies

Errors on Form 1095 can complicate tax filings, particularly if they affect premium tax credit calculations or compliance with state mandates. If you find mistakes, contact the form issuer—whether it’s the Health Insurance Marketplace, your employer, or your insurance provider. For instance, incorrect premium amounts or coverage dates on Form 1095-A should be reported to the Marketplace promptly, as these figures directly impact Form 8962 reconciliation. Corrections may take time, so addressing issues early is essential.

For Forms 1095-B or 1095-C, errors such as incorrect Social Security numbers or coverage dates should be resolved with the issuer. While these forms aren’t submitted with your federal return, inaccuracies can cause issues if the IRS or state tax authorities cross-reference your information. Once a corrected form is issued, review it to ensure all discrepancies are resolved. If corrections cannot be made before filing, submit your return on time using the most accurate information available and include an explanation of the discrepancy. This proactive approach helps mitigate potential penalties or audits.