With 1095-C extensions, questions arise for W-2 and 1040 forms
Posted on January 8th, 2016
By Chris Hadden, CPP
Greenshades Technical Sales Manager
With the recent filing extensions announced by the IRS on December 28th, I’ve been fielding a number of questions from clients who are concerned and confused about these new deadlines.
Some common questions I’m hearing are:
- Doesn’t the employee need the 1095-C form, along with the W-2?
- When are the W-2 forms due?
- How will the employee file their 1040, without a 1095-C?
- So what will employees do with this 1095-C?
- How do employers apply for this extension?
- Does this extension apply to next year, too?
The 1095-C forms are not required to be furnished to employees until March 31, 2016. That’s not to say that the employers are required to wait until that time. The IRS is recommending that employers furnish these statements to employees as soon as possible.
From an operational standpoint, many clients I’ve talked with are at a bit of a loss at the moment because they’ve spent the last few months educating their employees on this new form, and when the employees can expect to receive it.
Doesn’t the employee need the 1095-C form, along with the W-2? This is a very common question right now. Simply put, no. While yes, the 1095-C forms do need to be furnished to all eligible employees by March 31st, these forms do not need to be issued in conjunction with the W-2 forms. While many employers had intended to do this originally, and for operational reasons some may continue to do this, these new deadlines offer more flexibility to employers in when they would like to issue these 1095-C forms.
When are the W-2 forms due? Nothing has changed with the W-2 filing deadlines. W-2 statements must still be furnished to all employees, no later than February 1, 2016.
How will the employee file their 1040, without a 1095-C form? As the IRS recently addressed on an FAQ board (Questions and Answers about Health Care Information Forms for Individuals (Forms 1095-A, 1095-B, and 1095-C), employees will not need a copy of their 1095-C form in order to complete and file their 1040. While the information on the 1095-C form may assist in preparing a return, they are not required. Just like last year, if an employee and their family members had minimum essential coverage for every month of the year, they will simply check a box on the 1040 return to report that coverage. If they did not have coverage for the entire year, a coverage exemption may apply for the months without coverage. If an employee did not have coverage or an exemption, they may have to make an individual shared responsibility payment.
So what will employees do with this 1095-C? The 1095-C is used for a couple of things:
- The 1095-C can be used to help determine an employee’s eligibility for the Premium Tax Credit.
- If the employee was enrolled in a health plan in the Marketplace, they may need the information in Part II of the 1095-C to help determine their eligibility for the premium tax credit. (If an employee did not enroll in a health plan in the Marketplace, the information in Part II of the 1095-C is not relevant to them.)
- The 1095-C can be used by an employee to determine whether they or their family members were enrolled in certain kinds of coverage offered by the employer (sometimes referred to as “self-insured coverage”).
- If 1095-C shows coverage for the employee and everyone in their family for the entire year, they’ll check the full-year coverage box on the 1040 tax return.
- If there are months when the employee or family members did not have coverage, they should determine if they qualify for an exemption or if they must make an individual shared responsibility payment.
- Keep the 1095-C for their records. Employees should not be mailing a copy of the 1095-C along with their 1040. These 1095-C forms should be stored in a safe location.
How do employers apply for this extension? You don’t! That’s the best part. There are no forms or extensions that need to be filed. The IRS actually changed the due dates for 2015 forms, so all employers are automatically eligible and covered.
Does this extension apply to next year, too? No, the filing deadlines have not changed for 2016 forms, which are currently scheduled to be furnished to employees no later than January 31, 2017.
Keep in mind, whether you choose to file your 1095-C forms in January, or not, it’s critical that proper communication is shared with employees. If employees are expecting their 1095-C form in January, along with their W-2, you can be sure they’ll be giving you a phone call when they do not receive one at that time. So to avoid any confusion, communicate with your employees and educate them on the purpose of the 1095-C, as well as when they’ll be receiving this form.