Where's My 1095?' Addressing Tax Filing
Employees must affirm they received health coverage throughout the year
updated 3/30/2016
Many employees are confused over how to report that they received health coverage when filing their income tax returns this tax season, the first in which they’re required to affirm that they had Affordable Care Act (ACA)-compliant coverage throughout the year or risk penalties under the individual coverage mandate.
Much of this confusion involves Form 1095-B (Health Coverage) and Form 1095-C (Employer-Provided Health Insurance Offer and Coverage).
“There are two different 1095 forms that an employee or former employee might get, depending on how coverage was provided,” explained Mike Chittenden, a counsel at Miller & Chevalier in Washington, D.C. “If it’s fully insured coverage from a large employer”—with 50 or more full-time employees or equivalents, refered to as an applicable large employer (ALE)—“then they’ll receive a Form 1095-C from their employer and a Form 1095-B from the insurance company. If it’s self-insured coverage from an employer, they’ll just receive a 1095-C that combines the information that would otherwise appear on both forms.”
These forms are also filed with the IRS by large employers; Forms 1094-B and 1094-C are transmittal forms submitted to the IRS along with Forms 1095-B and 1095-C, respectively.
For small businesses with fewer than 50 full-time employees or equivalents that provide employees with an ACA-compliant group plan, the rules are a bit different. If fully insured (as most small companies are), the insurance company that provides coverage is required to send enrollees a copy of Form 1095-B and to submit Forms 1995-B (along with transmittal Form 1094-B) to the IRS in order to report minimum essential coverage.
If a small company is self-insured and provides coverage, it must provide employees and the IRS with Form 1095-B. But small business that offer insurance are not required to send Form 1095-Cs to employees or to the IRS.
| Fewer than 50 full-time employees/equivalents (non-ALEs) | 50 or more full-time employees/equivalents (ALEs) |
No coverage offered | Not subject to reporting |
|
Fully insured plan | Insurance company completes Forms 1094-B and 1095-B | Employer completes Forms 1094-C and 1095-C (Parts l and ll only) |
Self-insured plan | Employer completes Forms 1094-B and 1095-B | Employer completes Forms 1094-C and 1095-C (Parts l, ll and lll) |
Originally, these forms were intended to be given to employees or former employees by Feb. 1 (as Jan. 31 fell on a Sunday this year), along with Form W-2. Filers would then use them when completing Line 61 of their individual tax returns, showing that they had qualifying health coverage from their employer—referred to as minimum essential coverage—during the year. The form could be shared with tax preparers and retained with other tax documents.
But as many employers seemed unlikely to meet this deadline, the IRS issued Notice 2016-4 at the end of 2015, extending the due date for providing employees with Forms 1095-B and 1095-C until March 31, and extended other ACA reporting deadlines as well:
Forms | Previous IRS Due Date | New IRS Due Date |
Forms 1095-B and 1095-C due to employees. | Feb. 1, 2016 | March 31, 2016 |
Forms 1094-B, 1095-B, 1094-C and 1095-C to be filed with the IRS if filing on paper (fewer than 250 employees). | Feb. 29, 2016 | May 31, 2016 |
Forms 1094-B, 1095-B, 1094-C and 1095-C to be filed with the IRS if filing electronically. | March 31, 2016 | June 30, 2016 |
Source: ADP, based on IRS Notice 2016-4 and IRS Tax Tip 2016-27. | ||
Tax Filing Conundrum
The problem is that many employees had been told that they would need these forms to prepare their 2015 income taxes. Many even believed, incorrectly, that Form 1095s were to be filed with their tax returns, along with their Form W-2s.
To mitigate these concerns, in January the IRS updated its webpage with Questions and Answers about Health Care Information Forms for Individuals. In Q&A number 3, the IRS answers the question, “Must I wait to file until I receive these forms?” as follows:
If you are expecting to receive a Form 1095-A [for those enrolled in a nongroup plan through the ACA’s Health Insurance Marketplace], you should wait to file your 2015 income tax return until you receive that form. However, it is not necessary to wait for Forms 1095-B or 1095-C in order to file.
Some taxpayers may not receive a Form 1095-B or Form 1095-C by the time they are ready to file their 2015 tax return. While the information on these forms may assist in preparing a return, they are not required. Individual taxpayers will generally not be affected by this extension and should file their returns as they normally would.
Like last year, taxpayers can prepare and file their returns using other information about their health insurance. You should not attach any of these forms to your tax return.
But employees don’t typically read the latest IRS updates posted online. Employers, therefore, should inform workers to expect these forms by March 31, and assure them they may go ahead and file their taxes—and collect any refunds that may be coming their way—without waiting until the form is in their hands.
Filing Without Form 1095
“While the form is helpful, obviously, in that it gives you all the information you need in one place, most employees won’t need the form to complete their taxes,” Chittenden explained. “For example, if an employee worked for the same company and had coverage all year, then they can go ahead and complete their taxes and check the box that indicates coverage all year. Similarly, if they changed jobs but had coverage under their old and their new employer without a gap, they also can check the box saying ‘yes.’ You don’t have to attach a copy of the form to your return, whether you’re filing paper returns or filing electronically. So you don’t actually need Form 1095-B or Form 1095-C to complete your tax return.”
Given the deadline extension for providing these forms, “employees should be reassured that they don’t need them to complete their taxes, and employers should be telling them that,” Chittenden said.
Employers should also be prepared for questions when employees do receive their 1095s in March. Many who have already submitted their returns may worry that having done so without the form will require filing a corrected return.
Ask HR
If employees think they might have had a gap in health coverage but aren’t sure, they still don’t necessarily need the form. “They could look at their pay stubs to see if they include information about coverage—for example, if there are deductions in each month for coverage, then it’s a pretty safe bet that they probably had coverage in each month,” said Chittenden. “They can also go to the employer and ask HR, which can give them the answer about whether or not they had coverage.”
ACA reporting has been a challenge for many employers, and “they’re doing their best to get these forms out as quickly as they can,” said Chittenden. Due to the rush, “employees may subsequently receive corrected forms, if the employer determines later that they were inaccurate, so that’s something they should be aware may be coming. And employers should be aware that they have an obligation to correct incorrect forms.”
Penalties Reduced If Timely Correction Made
The penalty for not filing an information return with the IRS generally is $250 for each return. The penalty for providing an incorrect statement to employees/enrollees is $250 for each erroneous statement. Since there are separate penalties for returns filed with the IRS and for statements furnished to individuals, filing failures could easily result in “double” penalties.
The IRS has provided short-term relief from reporting penalties for 2015 filings, as long as the employer has made a good faith effort to comply with the reporting requirements, and has filed returns and provided statements on time. However, even employers that were late might be eligible for penalty relief if the IRS determines there was reasonable cause, an alert from Willis Towers Watson explains.
Form 1095-C: Deciphering the Codes Employees don’t need to know all the possible codes used on lines 14 and 16 of Form 1095-C, but they may ask about the codes on their own forms. Here’s a cheat sheet: Line 14 Codes: 1A. Qualifying offer. 1B. Coverage offered to employee only. 1C. Coverage offered to employee and dependents (not spouse). 1D. Coverage offered to employee and spouse (not dependents). 1E. Coverage offered to employee, spouse and dependents. 1F. Coverage offered, but coverage does not have minimum value. 1G. Coverage offered to non-full-time employee who enrolled in self-insured coverage. 1H. No offer of coverage. 1I. Qualifying offer of transition relief for 2015. Line 16 Codes: 2A. Employee not employed during the month. 2B. Employee not a full-time employee. 2C. Employee enrolled in coverage offered. 2D. Employee in section 4980H(b) limited non-assessment period. 2E. Multiemployer interim rule relief. 2F. Section 4980H affordability Form W-2 safe harbor. 2G. Section 4980H affordability federal-poverty-line safe harbor. 2H. Section 4980H affordability rate-of-pay safe harbor. 2I. Noncalendar year transition relief. |
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Getting the Word Out “The better that companies can get the information across now,” about the ACA tax forms employees will receive, “the fewer freak-outs they’ll be dealing with,” said Amanda Lannert, CEO of Chicago–based Jellyvision, a benefits communications technology firm. She advised employers to consider these pointers when communicating with employees about the new forms: • Leverage existing communications like intranets, payroll portals or manager meetings to notify employees that they will be receiving this thing called the 1095. • Don’t tell them what they don’t need to know—all they need to know is what this thing is and what to do with it. • Use conversational language—no “gobbledy-gook.” “The government often can’t help but make simple things mind-numbingly hard by not speaking like a person and using simple language to describe forms,” Lannert said. So instead of simply forwarding government descriptions of these documents to employees, “replace [those explanations] with something helpful—one government form at a time if that’s what it takes.” Applicable large employers “need to be prepared to distribute Forms 1095-C to employees by the newly extended deadline of March 31, as required by the IRS,” added Vic Saliterman, senior vice president and general manager of health care reform at payroll services firm ADP in New York City. “It’s also important for employers to explain the new forms to employees.” A recent study by ADP found that 83 percent of midsize employers (50 to 99 workers) and 57 percent of larger employers don’t think their employees understand these forms or how they are related to their 2015 tax filing obligations. |
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Return to Sender: Undeliverable 1095-Cs What does the HR department do after you’ve mailed out 1095-C forms to employees and, as necessary, former employees, but the post office returns some forms because the delivery address was invalid. “If the 1095-C belongs to an employee who works onsite, you could personally deliver it to him or her. But what if it belongs to a former employee, one who quit in March and obviously has moved since then. Where, you don’t know. What to do?,” asks an online post from the International Foundation of Employee Benefit Plans (IFEBP). “After attempting to send the 1095-C and documenting the attempt, you would be wise to keep evidence of your attempt, and keep copies of each Form 1095-C available or accessible to provide to individuals who request theirs at a later date,” advised Lois Mathis-Gleason, CEBS, IFEBP’s manager of reference/research services. “A possible course of action would be following IRS instructions for undeliverable W-2 forms. The 2016 instructions state on page 7, ‘Keep for 4 years any employee copies of Forms W-2 that you tried to but could not deliver.’ ” The IRS might issue more detailed instructions for undeliverable 1095s in the future. Watch for updates and, until then, focus on making good-faith, reasonable efforts. |
Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow me on Twitter.
Related Resources
- FAQs on Correcting IRS Forms 1094-C and 1095-C, Willis Towers Watson, March 2016
- Vexing 1095-C Coding Challenges, HR.BLR.com, March 2016
- Mark Your Calendars: Health Coverage Information Return Deadlines, IRS, March 2016
- Filing Health Coverage Information Returns, IRS, March 2016
- Questions and Answers about Health Care Information Forms for Individuals, IRS, January 2016
Related SHRM Articles
- Remind Workers About the Saver's Credit, SHRM Online Benefits, February 2016
- IRS Extends Deadlines for Reduced Penalties for Correcting ACA Information Returns, SHRM Online Benefits, January 2016
- IRS Is on a Messaging Mission: Make ACA Reporting Top-of-Mind, SHRM Online Benefits, November 2015
- ACA Information Reporting: Insights for the Journey, SHRM Online Benefits, November 2015
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