Results of a Washington Post-ABC News Poll in late 2014 showed that more than six in 10 Americans don’t understand how changes in the law will affect them. People have been confused about the Obama administration health care mandate since its inception, but are beginning to understand the financial ramifications. The tax forms for 2014 had new questions on it asking about health care coverage for dependents claimed, and 2015 tax filings will require proof of health care coverage to avoid penalties.
Employers and insurers have had deadlines for compliance pushed back, but those are coming to an end. Read on for answers to some of the most common questions about Affordable Care Act (ACA) compliance.
What are Forms 1094 and 1095?
The IRS has introduced new forms under the ACA, including Forms 1094 and 1095, which are used to report health care coverage.
All employers with more than 50 Full Time Equivalents (FTE’s) report coverage for employees on Form 1095-C, Employer-Provided Health Insurance Offer and Coverage. Form 1095-B is for Self-Insured employers with less than 50 FTS’s. Health Insurance Marketplace insurance providers report coverage for policyholders on Form 1095-A, Health Insurance Marketplace Statement. Forms 1094 (A, B & C) are transmittal cover pages, similar to what a W-3 does for W-2’s.
In 2016, income tax payers must file Form 1095-A, received either from their employers or their marketplace insurance providers (whichever they get insurance coverage from), with their income tax filings or be subject to penalties.
Who Files Forms 1094-B & C and 1095-B & C?
Those who provide insurance coverage legally have to file these new IRS reporting forms. Providers or plan sponsors must file Forms 1094-B and 1095-B. Applicable large employers (ALE’s) are legally obligated to file Forms 1094-C and 1095-C.
What is the Effective Date for Filing 1094’s and 1095’s?
ALEs with 50 or more full time employees in 2015 must comply by reporting in 2016. All providers, issuers, marketplaces, and self-funded plans must comply this year, as taxpayers will be required to have 1095’s to file 2015 income tax in 2016.
Employers and health insurers must distribute forms to employees and covered individuals by February 1, 2016. Filing these forms with the IRS is then required by February 29, 2016 or by March 31, 2016 if reporting is done electronically.
Does the Filer Have to be a Tax Preparer?
Filers do not have to be tax preparers, and most small, self-funded plans and ALE’s will be filed by an executive or administrative professional. The exception is if the employer retains a CPA, payroll provider, or third party human capital management provider that processes form completion and filing.
Can the Forms Be Completed and Mailed Before the end of 2015?
The forms can’t be completed and sent before the end of 2015 because each month of the year must be accounted for. Filing before all 12 months are completed would be an incomplete report and require a corrected return. Forms must be sent to insured participants and full-time employees by February 1, 2016, so keeping an ongoing account monthly in 2015 is important for timely filing.
What Address Is Used to Distribute 1095’s to Individuals and Employees?
The forms must be mailed to the last known address by first-class mail per IRS regulations. For anyone whose coverage cancels or whose employment terminates during the year, employers should try to obtain an updated mailing address.
Can 1095’s be Provided Electronically?
Just like W-2 forms, 1095’s can be provided electronically, but the providers, issuers, plan sponsors, or ALE’s doing so have to get consent from recipients to receive the forms electronically. The consent must be affirmative; it can’t be a default consent that requires opt-out.