Right 1095 to avoid tax penalty 

ANALOGOUS to taxpayers showing their earning statements with W2 or 1099, this year taxpayers are asked to show 1095s as their health insurance statements. Without proof of health insurance, they may have to pay a penalty.

A 1095 form basically declares who is covered by a health insurance meeting the “minimum essential coverage” defined by Affordable Care Act (ACA). It comes in several variations. They are 1095-A, 1095-B and 1095-C. 1095-A is issued by a health insurance marketplace plan like a Covered California Individual and Family plan (Covered CA IFP). Typically people who receive Advance Premium Tax Credit (APTC) or subsidy get 1095-A. But some people who paid full premium to buy a Covered CA IFP also get 1095-A. On the other hand, 1095-C is issued to people employed by large employers, i.e., those employing at least 50 full-time equivalents. Those who are not supposed to get 1095-A or 1095-C should get 1095-B. That means that people employed by small employers, people with Medicare, or people with Medi-Cal should all get 1095-B. Some people have multiple 1095 forms. For example, in certain months, a person may be in Medi-Cal so he would have a 1095-B, but for the rest of the year, if he is with Covered CA IFP, he would also receive a 1095-A.

Since the 1095-B and 1095-C are new this year and most of them were issued in late March, most affected taxpayers are caught unaware of their importance prior to filing their tax returns. They show the months the insureds are in the health plan and that info is used in tax filing. You need to contact the sender of the form if the info is incorrect.

We see that more people are more concerned with the 1095-A this year, primarily because of heavier penalty compared to previous year. People who are supposed to have 1095-A but didn’t use that info to file tax will get an IRS letter. Unfortunately, some of those who are supposed to get one were not mailed one or worse, were not prepared one by Covered CA. Those who have access to their Covered CA account can verify if there is a 1095-A softcopy. Those who do not have own access can ask their agents to check for them. While its existence is being verified in the account, those people must also verify if their residence and mailing addresses are still current. Perhaps the reason why they did not get 1095-A in the mail is because they did not report the address change.

If you believe that you should have a 1095-A but never got one, or you got one, but the info is incorrect, then you need to file a dispute form. If the names in the household are wrong, or a household member is missing, then that should be disputed. Or perhaps you have paid certain months to your health insurance but they did not reflect in the 1095-A, then they should be disputed. Or the 1095-A is incorrectly showing you are terminated.

The absence or the inaccuracy of 1095-A will impact the penalty computation for sure. For 2015, the penalty is roughly greater of 2 percent of household income or $325 per adult. For 2016, it is even higher; greater of 2.5 percent of household income or $695 per adult. Since the computation is done on per household and per month basis, you want the 1095-A to rightly reflect what you truly have.

When you buy a piece of equipment, you should consider after sales, like where to get service. Similarly, when you buy an insurance, you expect good service. Only buy from knowledgeable, trustworthy and reliable agents. For Covered CA plans, I suggest that you engage Certified Insurance Agents with Covered CA approved Storefronts. You may want to contact www.GlobalWealthInsuranceServices.com. Their agents can help you submit the Covered CA dispute form. They can also help you enroll into a plan to avoid this hefty 2016 penalty for not having health insurance.

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For more information, please contact Joseph Doratan at 855-955-1800 or [email protected].

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