Here’s the complete guide to the ACA Forms for the tax year 2020-2021 + useful resources + 4 tips for easy compliance.
Can you imagine a life where you don’t have health insurance? All it takes is one quick search on Google for you to be bombarded with insurance plans from different companies in less than an hour. You receive tons of emails and find related posts on your social media that try to sell you an insurance policy.
In 2021, almost every employee, professional, or individual has some or the other kind of insurance to protect them from unprecedented accidents or health issues.
However, things have not always been this convenient.
Since workers were asked to work in extreme weather and work conditions, which led to severe health complications, only 60 organizations were able to provide disability or accident coverage to employees. It was not until 1890 that sickness coverage was effectively incorporated.
The first-ever form of insurance was introduced in the U.S. back in the late 19th century. Even though it was not technically termed as an insurance policy, it still held the same benefits and coverage that of modern disability insurance.
Employer-sponsored insurance held great value back in the day. It was not until 1911 the first-ever employer-sponsored group disability policy was introduced in the U.S.
Soon enough, the demand for workplace safety and health insurance went through the roof, and the insurance industry started to boom.
Today, we will be discussing the Affordable Care Act, its history, and how to comply with the IRS by filing the required ACA forms for the tax year 2020-2021.
So, let’s get to it.
What are ACA Forms?
Affordable Care Act Forms are a set of informational return forms and substitute forms introduced by the IRS. These forms help communicate to the IRS if the employer is providing the Minimum Essential Coverage (MEC) to their employees and staying compliant.
The reforms and rules stipulated in the Act have to be complied with by individuals, businesses, employers, professionals, and others who are required by the law to file the forms to the IRS.
Origin Of The Affordable Care Act
The Affordable Care Act was introduced on March 23, 2010, after being enacted by the 111th United States Congress. The Patient Protection and Affordable Care Act was officially signed into law by the former president of the U.S. Barack Obama.
This act, along with the Health Care and Education Reconciliation Act of 2010 amendment, represents and upholds the U.S. healthcare system and shows how the system has been overhauled and expanded to meet the healthcare needs of the evolving nation.
About Form 1095-A
Form 1095-A (Health Insurance Marketplace Statement) is furnished by the Health Insurance Marketplace to the IRS to report the number of individuals who have enrolled in a valid healthcare plan through the Marketplace in a calendar year.
Individuals who receive this form use it to complete Form-8962 and reconcile advance payments of the premium tax credit or claim the premium tax credit on their tax return.
Individuals further use this form to communicate to the IRS if the provided insurance plan meets their provisional needs and whether it satisfies their healthcare requirement.
Health Insurance Marketplaces are required to furnish this form to the IRS before the due date.
About Form 1095-B
Form 1095-B (Health Coverage) is furnished by the insurer to the IRS to report the minimum essential coverage provided by the insurer to the individual. Insurers, employers, and government agencies provide this healthcare coverage to individuals and employees respectively.
Form 1095-B primarily communicates the type of plan, coverage, months of the year the coverage was provided, and the names of those who are covered by the plan.
Provisions in the Affordable Care Act suggest that employers who receive this form are required to report the coverage, withholdings, payments, and credits.
Essentially, this form communicates if the employer is providing the healthcare insurance to their employees and comprehensively reports the plans and coverage information.
Employers who are subject to the Employer Shared Responsibility Provisions that sponsor group healthcare plans to their employees are required to file this form to the IRS.
About Form 1095-C
Form 1095-C (Employer-Provided Health Insurance Offer and Coverage Insurance) is issued by employers who have 50 or more full-time employees. This form reports the health insurance coverage provided by the employer to the employee, and whether the employee took advantage of the health insurance.
Part II of the form is used by the employee to determine the eligibility criterion for the premium tax credit. If the individual did not enroll in a healthcare plan as offered by an insurer in the Marketplace, then this form is not relevant to them.
The employee can also use this form to understand whether the offered insurance plan covers the employee and their family members.
When should you file Form 1095-A
Please note that 1095-A is merely a statement for information and compliance purposes. This means that the form is not required to be filed to the IRS. However, the annual reports, which include the information stated in 1095-A, have to be furnished with the IRS.
Health Insurance Marketplaces must use this form if they provided a qualified insurance plan to the recipient (individual or family) which provides minimum essential coverage. Report the recipient’s name, coverage, plan enrolled, and other coverage-related information in the annual reports.
Form 1095-A should be filed by mail or handed in person or filed electronically only if the recipient fully consents to the method of filing.
Filers are required to submit the form to the IRS on or by the 1st of February 2021. Refer to the Complete Instructions For Form 1095-A for more information.
When should you file Form 1095-B?
Every individual or business entity that provides minimum essential coverage to an individual during a calendar year to an individual or a group of people has to file a return that states the information in Form 1095-B.
Employers who are subject to the Employer Shared Responsibility Provisions are required to use Part III of Form 1095-C to report the information.
Filers are required to use Form 1094-B (transmittal) to submit Forms 1095-B (returns).
The transmittal form (Form 1094-B) and the informational return form (Form 1095-B) are required to be filed by mail to the IRS on or by the 28th of February. If filing electronically, the forms have to be filed on or by the 31st of March.
Please note to file the forms in the year following the calendar year of coverage.
For example, if you have provided the coverage in the calendar year 2020, then you are required to file the forms in 2021. Find the latest filing instructions and requirements for Form 1094-B and 1095-B here.
When should you file Form 1095-C?
Employers with 50 or more full-time employees are required to use Form 1095-C to report the information as specified under sections 6055 and 6056.
Applicable Large Employer (ALE) members are required to file one or more Form 1094-C to the IRS to report information about the insurance coverage provided by them to their employees.
Due Date For Form 1095-C
The due date for furnishing Form 1095-C has been extended from the 31st of January 2021 to the 2nd of March 2021.
Please note to file the forms in the year following the calendar year of coverage.
For example, if you have provided the coverage in the calendar year 2020, then you are required to file the forms in 2021.
About Form 1094-C
1094-C is the transmittal form, which is used to report the information about each employee to the IRS. While 1095-C is the informational return form that reports the employer-provided health insurance offer and coverage.
Further, Form 1094-C is used to:
- Report the summary information for each ALE Member
- Determine whether an employee is eligible for a premium tax credit
- Transmit Forms 1095-C to the IRS
Together, Forms 1095-C and 1094-C are used to determine whether an ALE Member owes a payment according to the Employer Shared Responsibility Provisions.
Due Date For Form 1094-C
Form 1094-C has to be mailed to the IRS on or by the 28th of February. If filing electronically, the form has to be submitted on or by the 31st of March.
Please note to file the forms in the year following the calendar year of coverage.
For example, if you have provided the coverage in the calendar year 2020, then you are required to file the forms in 2021.
Find the latest filing instructions and requirements for Form 1094-C and 1095-C here.
When should you file all ACA forms?
If you are a qualified insurer or a coverage provider or an employer who has 25 or more full-time employees or an ALE (Applicable Large Employer), then you are required by law to furnish the 1095-A, 1095-B, 1095-C and their substitute forms to the IRS and your employees appropriately.
Please note that you have to file each form for each of your employees individually and the information should not be combined commonly for all your employees.
Depending on the provisions that apply to you and the size of your business, you are required to file one or more of the above forms to the IRS, and the insurance recipients or employees.
Filing these forms will help determine if you owe certain payments to the IRS. Further, it will also help determine if your employees are eligible for the premium tax credit.
4 Tips to easily comply with the IRS ACA filing requirements
Get familiar with the instructions
If you’re a new employer or finding it hard to comply with the ACA filing requirements, it is always a good idea to get started with the instructions. Get yourself familiar with the instructions and the specifications required to file the 1095 and its substitute forms accurately.
- Instructions For Form 1095-A
- Instructions For Form 1095-B and 1094-B
- Instructions For Form 1095-C and 1094-C
Understand the purpose of each form
There are a total of 5 forms, namely 1095-A, 1095-B, 1095-C, 1094-B, and 1094-C, which are required to furnished by the insurers or employers to the IRS and the insurance recipients. Similarly, the recipients are also required to file the informational returns to the IRS before the due dates.
Each of the forms holds different purposes as follows.
- Purpose of 1095-A
It’s a Health Insurance Marketplace Statement that communicates the information about recipients who have enrolled in a qualified insurance coverage plan in a calendar year through the Marketplace.
- Purpose of 1095-B
It is an IRS form that exclusively deals with Health Coverage and reports to the IRS the information about individuals who are covered by the minimum essential coverage.
- Purpose of 1094-B
A transmittal form that is used by small employers to submit Form 1095-B. Small employers who are not subject to the employer shared responsibility provisions sponsoring self-insured group health plans are required to file this form.
- Purpose of 1095-C
Form 1095-C exclusively deals with Employer-Provided Health Insurance Offer and Coverage. This form is to be furnished to an individual who is an employee of ALE for one or more months, and the IRS.
- Purpose of 1094-C
Form 1094-C is used to report the summary of information about each employee of ALE who is covered by a valid insurance plan.
Get professional help from tax experts
Regardless of the size of your business, it is always a good idea to have some extra help by your side to take care of complex tax filings, especially when inaccurate reports would result in heavy penalties and punishments.
Connect with reliable tax professionals on LinkedIn and other business communities. There are tons of professionals who charge very low and get the job done accurately.
Use an IRS-compliant e-filing platform
If hiring a tax professional is not your thing, then you should leverage Tax1099– a digital e-filing platform authorized by the IRS. It’s a state and federal compliant platform designed to help businesses of all sizes and types.
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