Essential Guide to Form 1095-C for Mid-Sized Businesses

You're a busy business owner, and the last thing you need is another tax form. But this one, Form 1095-C, is crucial, especially if you're a large employer.

You might be asking, what is Form 1095-C? Why is it important? Don't worry, in this post, we will explain everything you need to know about Form 1095-C so you can stay compliant with the Affordable Care Act (ACA).

What is Form 1095-C?

Form 1095-C, formally known as the Employer-Provided Health Insurance Offer and Coverage form, proves you, the employer, offered health insurance to your employees. It's a requirement set forth by the ACA. The IRS requires applicable large employers (ALEs) to furnish this form.

The IRS defines ALEs as those with 50 or more full-time employees, including full-time equivalent employees. Full-time is usually someone working 30 hours or more a week for your business. Form 1095-C details the health insurance coverage offered.

It also outlines the employee's options and costs for coverage. For more information, check out the IRS website for help with your specific tax preparation.

Understanding Why Form 1095-C Matters

Think of Form 1095-C as a way to demonstrate compliance with the ACA's employer mandate. This mandate requires ALEs to offer minimum essential coverage to their full-time employees. This coverage should also be affordable and provide minimum value.

Affordable, in this case, means the employee's cost for their coverage should not be more than 9.56 percent of their household income. This information helps the IRS determine if you, as an ALE, may face any penalties for not meeting those requirements.

But this isn't just about avoiding penalties. Form 1095-C gives your employees documentation of their health insurance coverage options throughout the tax year. They will need this when filing their income tax return.

This is especially true for those who want to claim the premium tax credit.

Breaking Down the Sections of Form 1095-C

This form may seem overwhelming, but let's simplify it by breaking it into sections:

Part I: Employee and Employer Information

This is straightforward. It identifies both you as the employer and your worker with essential information like:

Employee Name and SSN
Employer Name and EIN
Contact Information

Part II: Employee Offer of Coverage

Here, things become a bit trickier. This section reports the health insurance coverage offered. You have to include:

The type of coverage offered (if any)
Whether the offer was for the full year or only certain months
The employee's required contribution for self-only coverage

Part III: Covered Individuals

This section only applies if you are a self-insured employer providing coverage directly to workers. If so, you must provide information on each individual enrolled, including dependents who received coverage through the employer's health plan.

Form 1095-C Filing Instructions

Filing Form 1095-C can be tricky. If you plan to do this yourself, here is what you need to do. However, we strongly recommend that you work with qualified, experienced professionals who specialize in filing Form 1095-C paperwork like 1095EZ Online.

1. Gather necessary information: Collect employee data, including names, Social Security numbers, and addresses. Also, compile details about the health coverage offered to each employee.

2. Determine filing method: Choose between paper filing or electronic filing. Employers with 250 or more forms must file electronically.

3. Complete Part I: Fill in the employee's and employer's information, including names, addresses, and identification numbers.

4. Complete Part II: Enter the appropriate codes for each month to indicate the type of coverage offered, employee contributions, and safe harbor provisions.

5. Complete Part III: If self-insured, provide information about covered individuals, including their names, SSNs, and months of coverage.

6. Review for accuracy: Double-check all entries to ensure information is correct and complete.

7. Distribute to employees: Provide copies of Form 1095-C to employees by January 31 of the year following the reporting year.

8. File with the IRS: Submit forms to the IRS by February 28 if filing by paper, or March 31 if filing electronically.

9. Keep records: Maintain copies of all filed forms for at least three years from the filing due date.

Navigating Deadlines and Filing Methods for Form 1095-C

Similar to other tax forms, Form 1095-C has strict deadlines:

Form 1095-C Deadlines

Filing Method

January 31st

Furnishing to employees

February 28th

Filing paper forms with the IRS

March 31st

Filing electronically with the IRS (required for employers with 250+ forms)

You can file Form 1095-C electronically or by paper. Instructions can be located on Form 1095-C. For self-filing options and resources, check out the IRS website.

Avoiding Common Mistakes With Form 1095-C

One common mistake is forgetting to send Form 1095-C to your employees. You need to send this form by January 31st. It tells them about their health coverage options for the year.

It’s also essential to fill out the form correctly. The IRS wants specific codes on it. These codes show what kind of coverage you offered and when.

It can get pretty detailed. For example, did an employee work full-time all year? Or did they start in July? These things all need different codes.

FAQs about Form 1095-C

What is Form 1095-C used for?

This form is used for individuals to file their taxes. Businesses will use the 1094-C to transmit this information to the IRS. These paper forms are important to keep for your tax years in case you ever get audited.

Do I need to report 1095-C on my tax return?

No, but you will want to keep this form for your records when filing your tax returns. The IRS will be looking to see that you had the opportunity to receive the minimum essential coverage required by the ACA.

Where do I add Form 1095-C?

Form 1095-C information isn’t reported anywhere on your tax return but provides information about health coverage you had or were offered. Keep it with your other important tax information.

What happens if I don't file my 1095-A?

The 1095-A is for individuals to prove they had health coverage. The 1095-C is given from employers to their employees to satisfy IRS requirements. It is important to note, this isn’t legal advice, you’ll need to speak with a qualified professional.

Let 1095EZ Online Help

You now see why Form 1095-C is more than just a tax form; it represents a commitment to employee health and well-being while navigating ACA compliance. As an employer, understanding this form's intricacies allows you to maintain transparency with your team while fulfilling your legal obligations.

But this information should not be misconstrued as legal advice. It’s essential that you speak with a professional for personalized assistance. For more information or for help with Form 1095-C paperwork, contact us today!