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It started with the 2012 W-2s. For the first time employers were required to report the cost of employer paid
medical benefits as an information item. This information had no impact on tax computations.

2014 was the first year in which penalties were assessed because of lack of medical coverage. However,
reporting systems were generally not in place, so return preparers were allowed to take shortcuts in the process.
Tax software had input fields that allowed preparers to designate if a taxpayer or a dependent had health
insurance coverage for the entire year. Usually the answer was yes, and the effect on the cost of preparing tax
returns was minimal. Taxpayers were on the honor system.

2015 is the year of Bingo Blackout. Healthcare providers are supposed to produce reports that detail coverage
by month by adult and dependent covered. This monthly coverage information will be input into tax software,
and penalties will be calculated if there are gaps in coverage.

This is simple in concept, and should be easy if there is one provider for the entire year for all family members.
However, life is never as simple as imagined. Consider the following:

  • People change jobs, and provider changes usually result.
  • People change insurance carriers.
  • People change addresses, and tax documents end up being mailed to an old address.
  • People with children get divorced. Now an insurance obligation comes along with the dependency
    exemption. There may be different insurance coverage for different family members.
  • Junk mail is prolific. Mail gets thrown out.

The income based penalty rate for non-coverage is 2% of Modified Adjusted Gross Income for 2015, increasing
to 2.5% in 2016. This penalty is capped at the total yearly premium for a bronze level policy (national average)
sold through the exchange market place. For 2015 the average bronze level premium was $207 per month per
individual, so the size of the maximum penalty increases with family size.

There are also per capita penalties (2015: $325/adult; $162.50/child; $975 family maximum; 2016: $695/adult;
$347.50/child; $2,085 family maximum). These full-year penalties are prorated for partial non-coverage. You
pay the greater of the two penalties.

Unlike 2012 and 2013 when the reporting was just informational, returns cannot be completed until this
information has been received. The return preparation schedule will be held hostage by healthcare provider
reporting.

  • There will be more extended tax returns if provider reports are not available.
  • The cost of return preparation will increase.

Types of Reports

  • 1095-A Health Insurance Marketplace Statement
    This report is given to individuals who purchased insurance on one of the exchanges. It shows gross
    premiums, the cost of the second lowest cost silver plan, and the advance premium tax credit.
  • 1095-B
    This report is given to the employees of small businesses either by the employer or by an insurance
    company. Most of the time insurance companies will issue these. It includes the following:

    • employer
    • other provider
    • covered individuals by month (or full year coverage, if applicable)
  • 1095-C
    This report is issued by large employers (100+ employees for 2015) and includes the following
    information:

    • offer of coverage by month
    • employer share of lowest cost monthly premium
    • covered individuals by month (or full year coverage, if applicable)

Action for Taxpayers

Keep an eye out for any of these forms. The due date is February 1, 2016. If not received by mid-February, call
your employer or healthcare provider.

If you changed jobs and moved during the year, make sure your old employer has your new address.

If you intend to claim someone as a dependent, make sure you have the applicable report evidencing coverage.