2016 Taxes and Healthcare

2016 Taxes and Healthcare

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The author of this article is not a tax adviser or a tax attorney.  This article is meant for informational purposes only, not as tax advice.

The Affordable Care Act (ACA) connects taxes and health insurance coverage, and this connection creates many new tax forms.  This article provides information with respect to IRS Forms:

  • 1095-A;
  • 1095-B;
  • 1095-C;
  • 8962; and
  • 8965

IRS Form 1095-A

  • The 1095-A is sent by HealthSource RI (HSRI) to tax households who bought an individual market qualified health plan (QHP) through HSRI for any member of the household during 2015.  (If the QHP coverage was purchased through an exchange outside of RI, that exchange would send the 1095-A.)
  • The form identifies the coverage months for relevant household members, monthly premiums, monthly benchmark plan premiums, and advanced payments of premium tax credits (APTCs).
  • The form is used:
  • to provide information necessary to “reconcile” tax credits, using Form 8962 (see below); and
  • to prove that household members had minimum essential coverage (MEC) during the year, thus avoiding the tax penalty for being uninsured.

The form is a lot like a W-2 because taxpayers need not complete the form or submit it with their returns, but should save it for their records.  HSRI (or any other exchange/marketplace) will also send a copy of the form to the IRS.

HSRI is required to send this form before the end of January, 2016.

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IRS Form 1095-B

  • Sent by Medicaid, Medicare, employer-sponsored plans, and/or individual market plans.
  • Identifies who had MEC during what months.
  • For large employers (50+ employees) with self-insured plans, this information may come on a 1095-C (see below) rather than a 1095-B.
  • Used to prove that household members had MEC during the year, thus avoiding the tax penalty for being uninsured.

Like the 1095-A, taxpayers need not complete the form or submit it with their returns, but should save it for their records.  Whoever sent the form to the taxpayer will also send a copy of the form to the IRS.

The IRS recently extended the deadline for employers, carriers, and other providers of coverage to send the 1095-B form to consumers and to the IRS.  The new deadline is March 31, 2016.  Many taxpayers may want to complete their returns before that time, and they can do so.  The information on the 1095-B may be helpful in completing a tax return, but not every taxpayer will need the form before they can prepare their return.

The Rhode Island Medicaid program intends to send its 1095-B forms during January of 2016.  Rhode Island Medicaid recipients with questions about their 1095-B are being directed to call 855-855-6128.

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IRS Form 1095-C

  • Sent by large employers (50+ full-time employees) to all full-time employees.
  • Includes information about the employer’s offer of coverage, and cost.
  • Also may include information about who was covered on the employer’s plan by month.
  • Used primarily for large employers to prove that they offered “affordable” health insurance coverage to full time workers, as required by the ACA.
  • Also can be used to prove that household members had MEC, thus avoiding the tax penalty for being uninsured.

Like the 1095-A, taxpayers need not complete this form or submit it with their returns, but should save it for their records.  Whoever sent the form to the taxpayer will also send a copy of the form to the IRS.

The IRS recently extended the deadline for large employers to send the 1095-C form to consumers and to the IRS.  The new deadline is March 31, 2016.  Many taxpayers may want to complete their returns before that time, and they can do so.  The information on the 1095-C may be helpful in completing a tax return, but not every taxpayer will need the form before they can prepare their return.

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IRS Form 8962

  • Form 8962 is completed by the taxpayer (or tax preparer), not sent out by an employer or insurance company.  Taxpayers then submit the form together with their annual tax return.
  • Form 8962 must be completed by any taxpayer who received APTCs during the relevant tax year, and by any taxpayer who wants to claim a premium tax credit (PTC) at the end of the year.
  • Information from Form 1095-A is needed to complete form 8962.
    • Form 8962 is used to “reconcile” APTCs.  The form calculates how much in tax credits a taxpayer should have received (based on their final annual income) and compares that to the amount of APTCs received during the year.
    • If the taxpayer received more APTCs during the year than he should have, then he may owe the difference to the IRS in the form of increased tax liability (or reduced refund);
    • If the taxpayer received less in APTCs during the year than he should have, then the IRS may owe him the difference in the form of a bigger tax refund (or reduced tax liability).

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IRS Form 8965

  • Form 8965 is completed by the taxpayer (or tax preparer), and submitted with their annual tax return.
  • The ACA requires most Americans to have health insurance or else pay a tax penalty.  But some are eligible for “exemptions” from this requirement.  Form 8965 is used to apply for exemptions from the IRS, or to tell the IRS about exemptions that have been granted by HSRI (or another exchange/marketplace).
  • The instructions for Form 8965 (page 3) outline potential exemptions, and indicate whether each exemption is granted by the IRS or by HSRI (or another exchange/marketplace).

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Author: Sam Salganik
Date Created: Jan. 6, 2016
Date Updated: Mar. 1, 2017