Are you wondering what, if any, new ObamaCare tax forms you will either be receiving in the mail or including with your tax return come April?
This was a topic at a tax seminar I attended very recently. What may surprise you is that the ObamaCare tax forms are still in draft; yes, “draft,” and I am writing this in the middle of December.
Let’s go over the principal tax forms you may see and how they fit into the overall puzzle. The 2015 filing season will be the initial launch, and some rules have been relaxed or deferred until the 2016 filing season. This means you may or may not see or receive certain forms, depending upon the size of your employer and what type of insurance is offered. Let’s agree to speak in general terms and not include every technicality, otherwise we will both be pulling out our hair before this is over.
The key form (I suspect) you will receive is Form 1095-B.
You will be receiving the “B” from the employer’s insurance company. Its purpose is to show that you had health insurance (“minimum essential coverage” or “MEC,” in the lingo), as failure to have health insurance will trigger a penalty.
The form has four parts, as follows:
- The name and address of the principal insured person (probably you)
- The name and address of the employer
- The name and address of the insurance company
- The name and social security number of every person covered under the policy for the principal insured person. There are boxes for all 12 months, as the ObamaCare penalty is a month-by-month calculation.
What if your employer did not provide health insurance and you purchased coverage on the exchange? Now we are talking Form 1095-A, and the exchange will send it to you. It has three parts:
- The name of the principal insured person, as well as information about the marketplace itself and some policy information.
- The names and social security numbers of those covered under the policy.
- Monthly information, such as the premium amount and the amount of any subsidy (“advance payment”) received.
You will have received this form because you or a family member obtained health insurance through the exchange. You already know that the principal insured person (likely you) has to settle up with the IRS at year-end, comparing his/her household income, any subsidy received and any subsidy actually entitled to. The information on the “A” will – in turn – be reported on that form, which we will discuss in a minute.
We still have one more “1095” to talk about: the 1095-C. Frankly, I find this one to be the most confusing of the three.
The employer issues the “C.” Not all employers, mind you, only the “large employers,” as defined and subject to the $2,000/$3,000 penalty for not offering health insurance or offering health insurance that is not affordable.
You will not receive a “C” in 2015. Rather, you will receive one in 2016 if you were a full-time employee anytime during 2015. It can be included with your 2015 W-2, should your employer choose.
It has three parts:
- Employee and employer information, including identification numbers and addresses
- Recap of insurance coverage offered the employee, detailed for each month of the year. There are a series of codes to fill-in, depending upon a matrix of minimum essential coverage, minimum value, affordability and availability of family coverage.
- The third part applies only if the employer is self-insured.
BTW, you may have read that there is 2015 transition relief for employers having between 50 and 99 employees. That applies to the penalty, not to filing this paperwork. An employer with between 50 and 99 employees still has to file the “C.” You will receive this form in 2016 - if your employer has at least 50 employees.
NOTE: The IRS has said that employers can file this form “voluntarily” in 2015 for the 2014 tax year. Uh, sure.
Let’s recap. You would have received the “A”or “B” from a third party and (unlikely) a “C” from your employer. You now have to prepare your individual tax return. What new forms will you see there?
If you acquired insurance on an exchange, you will receive Form 1095-A. You will in turn use information from the “A” to complete Form 8962. Since you are on an exchange, you have to run the numbers to see if you are entitled to a subsidy. Combine this with the possibility that you received an advance subsidy, and you get the following combinations:
- You received a subsidy and it is exactly the subsidy to which you are entitled. I expect to see zero of these in my practice.
- You received a subsidy and it is less than you are entitled to. Congratulations, you have won a prize. Your tax preparer will include the difference and your tax refund will be larger than it would otherwise be.
- You received a subsidy and it is more than you are entitled to. Sorry, you now have to pay it back. Your refund will be less than it would otherwise be.
- You received no subsidy and you are entitled to no subsidy. I expect this to be the default in my tax practice. I suspect that we will not even have to file the form in this case, but I am waiting for clarification.
What if you did not have insurance and you did not go on the exchange? There are two more forms:
- If you have an exemption from buying insurance, you will file Form 8965. You have to provide a reason (that is, an “exemption”) for not buying health insurance.
- All right, technically the next one is not a form but rather a “worksheet” to Form 8965. The difference is that a worksheet may, but does not have to be, included with your tax return. A “form” must be included.
You are here if you did not go on the exchange and you do not have an exemption. You will owe the ObamaCare penalty, and this is where you calculate it. The penalty will go from here to your Form 1040 as additional taxes you owe.
And there you have it.
By the way, expect your tax preparation fees to go up.
About the author
Steven D. Hamilton is a career CPA, with extensive experience involving all aspects of tax practice, including sophisticated income tax planning and handling of tax controversy matters for closely-held businesses and high-income individuals.