1095-C Form: What It Means for Your Taxes

1095-C Form: What It Means for Your Taxes

The 1095-C form, “Employer-Provided Health Insurance Offer and Coverage,” is a crucial document for understanding your health insurance coverage and how it impacts your tax filing. While you don’t need it to file your taxes (unlike the W-2 or 1099), understanding its contents is essential for accurate reporting and avoiding potential penalties. It provides information about the health insurance coverage offered to you by your employer (if they are an Applicable Large Employer – ALE).

Here’s a breakdown of what the 1095-C is, what information it contains, and what it means for your taxes:

What is an Applicable Large Employer (ALE)?

An ALE is an employer with an average of at least 50 full-time employees (including full-time equivalent employees) during the preceding calendar year. These employers are required to offer affordable, minimum-value health coverage to their full-time employees (and their dependents) under the Affordable Care Act (ACA). If your employer meets this definition, they must provide you with a 1095-C. If you work for a smaller employer that isn’t an ALE, you won’t receive this form.

Why do you receive the 1095-C?

The 1095-C serves two primary purposes:

1. For the IRS: It reports to the IRS whether your employer offered you health insurance that met the ACA’s requirements (affordable and minimum value). This helps the IRS enforce the employer mandate of the ACA.
2. For You (the Employee): It provides you with information about the health insurance offered, whether you enrolled, and for which months. While you don’t submit the form with your tax return, you need the information on the form to accurately answer questions about your health coverage during the tax year. This helps determine if you are eligible for the Premium Tax Credit (PTC) or if you owe the individual shared responsibility payment (though this penalty is currently $0 at the federal level, some states have their own penalties).

Detailed Breakdown of the 1095-C Form:

The 1095-C is divided into three parts:

Part I: Employee and Employer Information

This section contains basic identifying information about you and your employer:

• Lines 1-6: Employee Information: Your name, Social Security Number (SSN), address, and other identifying details.
• Lines 7-13: Employer Information: Your employer’s name, Employer Identification Number (EIN), address, and contact information.
• Line 10: Contact phone number: The phone number the individual may call to get answers to questions about the information reported on the Form 1095-C.

Part II: Employee Offer of Coverage (This is the most critical part for your understanding)

This section details the health insurance coverage your employer offered to you:

• Line 14: Offer of Coverage Code: This is a crucial code that indicates the type of coverage offered for each month. There’s a code for each month of the year. Here are some of the most common codes:

  • 1A: Qualifying Offer: Minimum essential coverage providing minimum value offered to you with employee contribution for self-only coverage equal to or less than 9.5% (as adjusted) of the 48 contiguous states single mainland Federal Poverty Level and at least minimum essential coverage offered to spouse and dependent(s).
  • 1B: Minimum essential coverage providing minimum value offered to you only.
  • 1C: Minimum essential coverage providing minimum value offered to you and at least minimum essential coverage offered to dependent(s) (not spouse).
  • 1D: Minimum essential coverage providing minimum value offered to you and at least minimum essential coverage offered to spouse (not dependent(s)).
  • 1E: Minimum essential coverage providing minimum value offered to you and at least minimum essential coverage offered to dependent(s) and spouse.
  • 1F: Minimum essential coverage NOT providing minimum value offered to you, or you and spouse or dependent(s), or you, spouse and dependents.
  • 1G: Offer of coverage for at least one month of the calendar year to an individual who was not a full-time employee for any month of the calendar year and who enrolled in self-insured coverage for one or more months of the calendar year.
  • 1H: No offer of coverage (you were not offered any health coverage or you were not a full-time employee).
  • 1J: Minimum essential coverage providing minimum value offered to you; minimum essential coverage conditionally offered to spouse; and minimum essential coverage not offered to dependent(s).
  • 1K: Minimum essential coverage providing minimum value offered to you; at least minimum essential coverage offered to dependents; and minimum essential coverage conditionally offered to spouse.
  • 1L – 1S: Various other codes for different types of Minimum Essential Coverage.
  • 2 Codes: See descriptions for line 16 below

  It’s essential to understand what these codes mean, as they describe the nature of the health coverage offered to you. The IRS instructions for Form 1095-C provide a complete list and explanation of all codes.

• Line 15: Employee Required Contribution: This line shows the employee’s share of the lowest-cost self-only coverage offered that provides minimum value. This is not necessarily the premium you actually paid (if you chose a different plan or included family members). This amount is used to determine if the coverage was “affordable” under the ACA. This amount is only reported if code 1B, 1C, 1D, 1E, 1J, 1K, 1L, 1M, 1N, 1O, 1P, or 1Q, is entered on line 14.

• Line 16: Section 4980H Safe Harbor Codes (and Other Relief): This line uses codes to explain why your employer might not be subject to a penalty under the employer mandate, even if they didn’t offer coverage that met all the requirements (or didn’t offer coverage at all). Here are some common codes:

  • 2A: Employee not employed during the month.
  • 2B: Employee not a full-time employee.
  • 2C: Employee enrolled in coverage offered. (This is important: if you see 2C for a month, it means you were enrolled in your employer’s coverage for that month).
  • 2D: Employee in a 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: Non-calendar year transition relief applies to this employee.

  Again, the IRS instructions provide a comprehensive list and explanation of these codes.

Part III: Covered Individuals (Only applies if your employer offers self-insured coverage)

This section is only completed if your employer offers a self-insured health plan (where the employer, rather than an insurance company, takes on the financial risk of providing healthcare benefits). If your employer uses a traditional insurance company, this section will be blank.

• Lines 17- (as many lines as needed): Lists the names, SSNs (or dates of birth if SSN is unavailable), and coverage information for each individual covered under the self-insured plan (you and any covered dependents). A checkbox indicates whether the individual was covered for each month of the year.

What to Do with Your 1095-C:

1. Review for Accuracy: Carefully check all the information on the form, especially your SSN, the coverage codes on Line 14, and the employee contribution on Line 15. If you find any errors, contact your employer’s HR department to request a corrected form.
2. Keep it with Your Tax Records: While you don’t submit the 1095-C with your tax return, you should keep it with your other tax documents. You might need it if the IRS has questions about your health coverage.
3. Use it to Complete Your Tax Return: The information on the 1095-C, especially the codes on Lines 14 and 16, will help you answer questions about your health coverage on your tax return (Form 1040). Specifically, you’ll need this information if you’re claiming the Premium Tax Credit (Form 8962) or if you need to reconcile any advance payments of the Premium Tax Credit.
4. Understand Your Coverage: The 1095-C provides a valuable summary of the health insurance offered to you by your employer. This information can be helpful in understanding your healthcare options and costs.

Important Considerations:

• Multiple 1095-Cs: If you worked for more than one ALE during the year, you’ll receive a 1095-C from each employer.
• No 1095-C: If you didn’t work for an ALE, you won’t receive a 1095-C. You might receive a 1095-B (from your insurance company) or a 1095-A (if you purchased coverage through the Marketplace).
• Individual Shared Responsibility Payment: Although the federal penalty for not having health insurance is currently $0, some states have their own individual mandates and penalties. Check your state’s requirements. The 1095-C doesn’t directly determine if you owe a penalty (that’s based on whether you had qualifying coverage), but it provides information about your employer’s offer.
• Premium Tax Credit: If you had marketplace insurance and did not have employer coverage, you will not use information from Form 1095-C. If you had marketplace coverage, you will receive Form 1095-A.

In summary, the 1095-C is an informational form that helps you and the IRS understand your employer-sponsored health insurance coverage. While you don’t submit it with your taxes, it’s crucial to review it for accuracy and keep it for your records. Understanding the codes and information on the form will help you accurately report your health coverage on your tax return and avoid any potential issues. If you have any questions or concerns about your 1095-C, contact your employer’s HR department or a qualified tax professional.