Differences Between Forms 1095-A, B, and C

Running payroll is a complex task. As the person in charge of ensuring everyone in your company gets paid, you must track all employee compensation, including wages, salaries, commissions, and tips. You must also report and pay payroll taxes like Social Security and Medicare.

1095 Forms are IRS information returns used to report health coverage information on covered employees. Under the Affordable Care Act (ACA), health plan providers and employers must disclose to the IRS the type of healthcare coverage they offer employees during a tax period.

There are three 1095 Forms. Each is filed differently and has unique implications for how covered employees file their taxes. Let's review each form, what it covers, who must fill it out, and how.

What Are 1095 Forms?

1095 Forms are IRS tax forms used to determine whether employers and employees have met their mandate under the ACA. Like Forms W-2 and 1099, they contain information an employee needs to file their individual taxes. There are three 1095 Forms:

• Form 1095-A, Health Insurance Marketplace Statement
• Form 1095-B, Health Coverage
• Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

1095 Forms inform the IRS whether an employee, their spouse, and dependents had healthcare coverage for the entire tax year and, if not, for which months they were uncovered.

Each 1095 Form is different. The documents are provided by different entities and to different groups. They also contain different information.

See also: Form 1099-NEC vs. Form 1099-MISC and how to file them

What is a 1095-A (Health Insurance Marketplace Statement)?

The ACA mandates that each state have a health insurance exchange. Also known as a Marketplace, this is a regulated online site where employees, families, and small businesses can buy private insurance plans. Marketplaces are run by the federal or state government.

When an employee gets their healthcare coverage from a Marketplace during a tax year, they are entitled to a Form 1095-A from their provider. This form is also called the Health Insurance Marketplace Statement. It covers employees who did not participate in or have access to a company-sponsored health insurance plan the previous year.

Who receives a 1095-A?

If your employee bought their health plan from a Health Insurance Marketplace, they should receive Form 1095-A. This IRS form allows them to:

• Fill out Form 8962 requesting the refundable premium tax credit
• File an accurate income tax return with the IRS
• Reconcile the credit on their returns with advance payments on the premium tax credit

Health Insurance Marketplaces must mail Form 1095-A to qualified recipients before mid-February every tax year. Employers do not need a copy of this form.

What information is included in a 1095-A?

Form 1095-A reports on the type of coverage an employee received from a Marketplace during a tax year. To do this, it must contain:

• The coverage amount
• The names of the people covered under the plan
• The total amount of premiums paid
• The premium tax credits used to pay for the health plan

This form also includes the second-lowest-cost Silver plan (SLCSP). The ACA offers a tax break to qualified employees on their health insurance costs. Known as the premium tax credit, this refundable figure offsets an employee's premiums against the second-lowest-priced Marketplace plan in the Silver category. Employees need the information on Form 1095-A to claim this credit.

Do employees need a 1095-A to file taxes?

Yes. If your employee expects a Form 1095-A from their Marketplace provider, they should wait to receive it to file their federal taxes. They do not, however, need to attach it to their tax return.

Do you need to provide employees with Form 1095-A?

No. 1095 Forms are filled by whoever provided an employee with health coverage during a tax year. In this case, the Marketplace provider that issued the coverage must furnish your employee with Form 1095-A. If your employee has yet to receive this form by mid-February, they should contact their provider. You can learn more about Form 1095-A here.

See also: How to file taxes as a self-employed freelancer or independent contractor

What is a 1095-B (Insurance Provider Statement)?

Form 1095-B provides healthcare coverage information to the IRS about individuals with minimum essential healthcare coverage.

Under the ACA, qualified taxpayers who enroll through a self-insured employer or insurance provider outside the Marketplace are entitled to minimum essential coverage.

Most employer-sponsored insurance plans qualify as minimum essential coverage. Government-sponsored programs like Medicaid, CHIP, and Medicare also qualify.

Who issues Form 1095-B?

Like Form 1095-A, Form 1095-B must be issued by the entity that provides the minimum essential coverage. Insurance coverage providers who may fall under this purview include:

• Government agencies
• Employers and small businesses who offer self-insured coverage
• Insurance companies outside the Marketplace
• Other coverage providers

Who files Form 1095-B?

Employers. If you are a small employer not subject to employer-shared responsibility provisions under the ACA, you must fill out Form 1095-B for all the employees who subscribe to your self-insured group health plan.

ACA employer-shared responsibility provisions apply to applicable large employers (ALEs) or employers with more than 50 full-time employees. If your business does not meet this threshold, i.e., you have less than 50 full-time employees, you must complete and file Form 1095-B.

Who receives a 1095-B?

Once you file this form, you must send it to all the employees covered under your insurance plan. Your employees need this form for tax preparation when filing their individual taxes. While they should store it with their tax records, they do not need to attach it to their returns.

In most cases, covered employees include their spouses or dependents in their coverage. You do not need to send a copy of Form 1095-B to everyone mentioned in the plan. Instead, furnish a completed copy to the person named as the "responsible individual" on the form, in this case, your employee.

What information is included in a 1095-B?

Form 1095-B must include relevant information about the minimum essential coverage you offered your employees the previous year. This includes:

• The type of plan
• The period of coverage
• The name of the covered employee
• The names of dependents covered by the plan
• The insurance company providing the plan
• Your business’s name

Remember, you must file individual Form 1095-Bs for each of your covered employees. You may also need to file and submit Form 1099-MISC for any medical and health care payments you make over $600 for your employees. This includes Social Security and Medicare taxes.

When should you file and send a 1095-B?

Insurers, employers, and plan providers must provide covered individuals with Form 1095-Bs before January 31. However, while your employees need the information on these forms to file their returns, they do not need to wait for them. They can glean that information from other sources and file their returns.

See also: A state-by-state guide to US payroll taxes

What is Form 1095-C (Employer-Provided Health Insurance Offer and Coverage)?

Form 1095-C is a tax form used by applicable large employers (ALEs) to report health insurance coverage information for each of their employees to the IRS.

Under the ACA employer mandate, employers who qualify as an ALE must provide healthcare coverage to their workers. If you are an ALE, you must report this coverage to the IRS through Form 1095-C.

You must also send this form to your full-time employees who work 30 or more hours per week. This is regardless of whether they enrolled in the employer-sponsored insurance plan the previous year. Additionally, you must report their coverage information for all 12 months of the calendar year.

What is Form 1094-C?

After you file and send Form 1095-Cs to your employees, you must also file Form 1094-C. This is a summary form like Form 1096 that aggregates all the 1095-C Forms you have filed for a given calendar year. It includes the following information:

• Your Employer Identification Number (EIN),
• Your contact information
• A contact person’s name and contact information, usually the head of HR
• The total number of employees issued with 1095-C forms

Are you an Applicable Large Employer (ALE)?

Per the ACA, you are an ALE if you have employed an average of at least 50 or more full-time employees or full-time equivalent workers in the previous calendar year. A group of employers managed by the same entity is also considered an ALE if it meets this threshold.

As a Form 1095-C employer, you must report your company-sponsored health care plan when you file your payroll taxes to avoid IRS penalties. Learn more about how to determine if you are an ALE.

Who receives a 1095-C?

Once you complete and file Form 1095-C, you must furnish it to all your full-time employees who worked for one or more months in your company the previous year. Your employees need this information to file accurate returns, although they don’t need to send a copy to the IRS.

What information is included in a 1095-C?

Like the other forms we have reviewed, Form 1095-C reports information about the company-sponsored healthcare coverage you offered your employees the previous year. This form includes: 

• The employee’s name
• Your (employer) name
• The type of coverage
• The months during which the employee was eligible for coverage
• The dependents covered under the plan
• The cost of the least expensive premium the employee could pay under the plan

Your Form 1095-C should indicate if you did not offer health coverage to your full-time employees in the previous year and if an employee opted out of the company-sponsored plan.

How does the 1095-C impact employer-shared responsibility?

The employer-shared responsibility provisions under the ACA require ALEs to:

• Provide minimum essential coverage to their full-time or full-time equivalent employees and these employees’ dependents
• Or, failing that, pay an employer shared responsibility payment to the IRS
• Report any such coverage (or lack thereof) to the IRS

When you send Form 1094-C to the IRS, the information within it is used to determine whether you met your ACA employer mandate or owe payment to the IRS. The IRS also uses the information on Form 1095-C to determine if you have complied with the ACA. 

How to use 1095 Forms

1095 Forms should contain all the details necessary to let the IRS know what kind of coverage you offered your employees during a tax year, which employees and their dependents were covered, and how much the plan cost. The IRS provides more information on how to complete these forms.

Should you file a 1095 form?

It is not always clear whether you should file 1095 Forms for your employees. As a rule of thumb, the ACA requires that insurance "providers" send covered individuals a form coinciding with their type of coverage. A provider is an organization or company that pays a covered individual's medical bills. This is usually an insurance company or Marketplace insurer.

If you self-insure your company and offer your employees coverage under this company-sponsored plan, you become the insurance provider. This means that you, not the company from which you got the coverage, must file 1095 Forms with the IRS and furnish them to your employees.

Could you be required to file two forms?

Yes. Most self-insured employers with over 50 full-time employees are technically required to file both Forms 1095-B and 1095-C. This is because they:

• Offer minimum essential coverage under a self-insured group health care plan (1095-B)
• Qualify as an ALE (1095-C)

However, they can combine information about the coverage offered into a single Form 1095-C for each full-time or full-time equivalent employee.

Should you keep 1095 Forms?

Yes. 1095 Forms are important tax documents that record your employee's health coverage information. The IRS uses these forms to determine whether you have met your employer mandate during a tax year or if you are liable for penalties. These documents are crucial to your company's tax compliance status and could be requested by law during an audit.

How do you resolve discrepancies in 1095 Forms?

The IRS provides instructions on how to correct discrepancies and resolve conflicts in 1095 Forms. If, for instance, you receive information from your insurance provider and realize the form you filed had an error, you must correct it. How you do so depends on when you realize the error.

If you have already filed the form with the IRS, you must file a corrected return as soon as you discover the error. Enter an “X” in the CORRECTED checkbox on the form and the new accurate information. You must also send the affected employee a copy of the corrected form.

If you have not filed the form with the IRS, complete a new form with the accurate information and furnish it to your employee. You do not need to enter an “X” in the CORRECTED checkbox on the form.

Your employee may need to file an amended tax return, Form 1040-X, after receiving the corrected form, but this is not always necessary. A tax expert can help them navigate the issue.

Streamline your payroll tax compliance with Deel

1095 Forms are crucial to your company’s tax compliance status. Although you do not need to file Form 1095-A, failing to file Forms 1095-B and C can expose your business to audits and penalties under the ACA. Understanding the differences between 1095 Forms and how and when to file them can help you achieve and maintain compliance.

At Deel, we understand that tracking, filing, and furnishing tax forms is stressful and time-consuming. There are so many documents to go through, including obsolete forms and a wide array of regulations to consider. Deel payroll management and PEO services handle these concerns for you so you can focus on the business end of your business.

Deel experts and software accurately and automatically calculate and file your payroll taxes with the IRS. Our in-house team of tax and legal experts offers customized tax compliance monitoring and regulatory updates across 50 states, allowing you to pay your US employees from wherever.

Reach out to our team or book a demo today to get started.