The Patient Protection and Affordable Care Act (PPACA), also known as the Affordable Care Act (ACA) or ObamaCare was passed in 2010 and brought a multitude of changes to the Healthcare system, such as the minimum health care mandate.
Not only does the Act bring in changes to the existing healthcare system, but it also has certain mandatory filing requirements, which employers and insurers are expected to comply with from the year 2016 (reporting year 2015) onwards.
Although not every taxpayer is subject to these reporting requirements, they may still need to receive information from these forms to complete their personal tax return. Therefore, in this article, AG Tax analysts have prepared a brief overview of the filing and reporting requirements under ACA, deadlines (if any), and penalties that may apply in case of non-compliance.
Overview of Patient Protection and Affordable Care Act (PPACA), Affordable Care Act (ACA) or ObamaCare
The ACA was enacted in 2010 with the purpose of ensuring that every American has at least the bare minimum of health insurance, to improve the quality of the coverage provided, and reduce the rate of uninsured individuals by providing affordable insurance by enhancing private and public health insurance coverage.
ACA brought in changes such as mandates, subsidies, and insurance exchanges, which require every individual to have the minimum necessary health coverage for themselves and their dependents. This could lead to a penalty of 1% for each month the person had lower than the required level of insurance. In order to support this individual mandate, the government also introduced various marketplaces where the coverage may be purchased at affordable rates.
ACA Filing & Reporting Requirement
In order to comply with these new regulations, there are certain forms that are required to be filed by the taxpayer. Some of these forms are as follows:
1095-A, Health Insurance Marketplace Statement: Insurance issuers and carriers are required to report the individual market qualified health plans that individuals are enrolled in through Health Insurance Marketplaces on Form 1095-A and not on Form 1095-B.
Form 1095-B, Health Coverage: Health insurance issuers and small employers, who are not subject to the employer shared responsibility provisions but sponsor self-insured group health plans, would need to file Form 1095-B to report information on coverage for employees obtained through the Small Business Health Options Program (government-sponsored programs, eligible employer-sponsored plans, individual market plans, and other coverage the Department of Health and Human Services).
Form 1095-B provides details of the coverage offered to the employee at the lowest premium to the employee, and the months for which the coverage was available.
Form 1095-C, Employer-Provided Health Insurance Offer and Coverage: This form is used to report information about the minimum essential coverage provided to the employee under the employer plan, and thus confirming that the individual has met the individual shared responsibility requirement for the months that they were covered under the plan. It needs to be filed by employers, with 50 or more full-time employees (including government employers) subject to the employer shared responsibility provisions, and therefore sponsoring self-insured group health plans to report information about the provided coverage.
A copy of Form 1095-C is provided to both the IRS and the employee, regardless of their participation the employer’s offered health plan.
The IRS uses this form in determining the eligibility of the employee for the premium tax credit, tracking whether employers are providing the minimum health coverage required to their employees, and to provide financial assistance to some people who do not have an opportunity to get coverage through an employer.
Form 1095-C must be prepared by the end of January each year, and received by the IRS by end of February, if paper filed, and by March-end, if filed electronically.
Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns: Form 1094-C should be used by employers, with 50 or more full-time employees, to report information about offers of health coverage and enrollment in health coverage for their employees under §6055 and §6056.
Information regarding the employer’s address, contact information, identification number (EIN), number of employees during the tax year, and the number of 1095-C’s sent to the IRS are reported on this form.
That being said, the main difference is that the 1095-C provides information about health insurance and is sent to both employees and the IRS, while the 1094-C provides information of the 1095-C, and sent only to the IRS.
These forms will be mandatory from 2016 onwards, and non-compliance could lead to penalties. Therefore, it is highly recommended that employers, whether or not they fulfill the required criteria, consult with their tax advisor or practitioner regarding the ACA laws, and the required compliance procedures. Since each taxpayer’s situation may be different, a proper and detailed analysis of their tax situation can help prevent any tax compliance issues.
AG TAX LLP Can Help
If you have any queries regarding this law, or any other tax-related queries, and/or need assistance/help with tax planning/filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.
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