How does Form 1095-C Affect Taxes?
Overview
Form 1095-C is an important tax form used to report the health insurance coverage of employees and their dependents under the Affordable Care Act (ACA). This form is typically provided by employers to their employees each year, and it can have a significant impact on their taxes. In this article, we will explore how Form 1095-C affects taxes and what you need to know as an employer or employee.
What is Form 1095-C?
Form 1095-C is an annual information return that must be filed by applicable large employers (ALEs) to report the health insurance coverage of their full-time employees and their dependents. The form provides important information about the employer-sponsored health coverage, including the number of full-time employees, the number of months the employee was covered, and the average premium cost of the plan.
Who receives a 1095-C?
An employer must provide a 1095-C to each full-time employee, including:
• Full-time employees, who work 30 or more hours per week, on average, for at least 120 days in a calendar year
• Part-time employees who are reasonably expected to work 30 or more hours per week, on average, for at least 120 days in a calendar year
• Seasonal employees who work 30 or more hours per week, on average, for at least 120 days in a calendar year
How does Form 1095-C affect taxes?
The information provided on Form 1095-C can have a significant impact on taxes, particularly for employees who experience a change in their health insurance status. For example:
• Employers: The information reported on the 1095-C can affect the employer’s taxes, as they may be subject to a penalty if they do not offer coverage to at least 95% of full-time employees.
• Employees: The 1095-C may also affect an employee’s taxes, as it provides information on the affordability of their health insurance coverage. This can impact their premiums, premium subsidies, and Shared Responsibility Payment (SRP).
Penalties for Not Providing Health Coverage
Under the ACA, employers who do not offer health insurance coverage to at least 95% of their full-time employees may be subject to a penalty. This penalty is calculated based on the number of full-time employees and the average premium cost of the plan.
Penalty Calculation:
| Size of Employer | Number of Full-Time Employees | Penalty |
|---|---|---|
| 50-99 | $2,080 – $2,880 per employee | $110,000 – $160,000 employer |
| 100-249 | $2,080 – $2,880 per employee | $165,000 – $240,000 employer |
| 250 or more | $2,080 – $2,880 per employee | $280,000 or more employer |
How to File Form 1095-C
Employers must file Form 1095-C with the IRS by March 31 of each year, and provide a copy to each full-time employee by January 31. The form must be filed electronically, unless the employer has 250 or fewer employees, in which case they may file by paper.
Conclusion
Form 1095-C is an important tax form that reports an employer’s health insurance coverage of full-time employees and their dependents. As an employer or employee, it is essential to understand the implications of this form on taxes, including potential penalties for non-compliance. By understanding how Figuring Form 1095-C affects taxes, you can better navigate the complex landscape of the Affordable Care Act.
Additional Resources:
- IRS: Information About Form 1095-C
- [Healthcare.gov: Form 1095-C FAQs](https://www.healthcare.gov/ marketplace-administrators/1095c-faq.html)
- ACA Implementation Timeline
Note:
- The information provided is general and not specific tax or legal advice. It is recommended that you consult with a qualified professional for specific guidance on how Form 1095-C may affect your individual or business situation.