What Taxpayers Need to Know about Reporting Health Coverage on Tax Forms
While many people know there is a fee incurred by people who do not have health insurance, they do not understand how the Internal Revenue Service knows if they have insurance. When a person enrolls in an insurance policy, information is sent to the IRS by the insurer. Any coverage purchased must meet the minimum essential coverage requirements. If a policy does not meet these standards or if a person goes uninsured, the fee is assessed based on income and every month a person was uninsured or did not have sufficient coverage.
The 2014 tax year was the first year where people had to submit information about their health insurance coverage. This was reported on line 61 of IRS Form 1040. People who had coverage should check the box. For those who did not have coverage, the box should not be checked. For the 2015 tax year and beyond, look for the Form 1095-B from your insurance company. It will be sent out for all policyholders to help them file their tax returns.
What Is A 1095-B?
This form shows what type of coverage a person has, the period of coverage and the person or people who are covered. This includes the policyholder and any spouses or dependents. If there are any adult dependents under the plan, they will not receive their own Form 1095-B. It is not necessary to have the same health insurance plan for spouses and children. However, every person must have health insurance or qualify for an exemption.
Some examples of exemptions include losing a job where the employer provided insurance, moving out of state, incarceration and similar events. When in doubt, discuss these exemption rules with an agent. People who do not have insurance and do not qualify for an exemption will be fined on tax forms for the months they were uninsured based on their total household income. If a person has insurance from one provider for part of the year and insurance from another provider for the other part of the year, that individual should receive two separate Form 1095-B statements.
Expect to see these forms arrive in the mail every year around the time when W-2s, 1099s and other tax forms arrive in the mail. To learn more about exemptions and how to use a Form 1095-B to report insurance coverage, discuss concerns with your agent.