Why do I need a 1095A with my tax return

Marketplace Insurance and Your 1095-A: What You Need to Know

If you’re a family enrolled in Marketplace health insurance, you’ve likely heard about the 1095-A form. It’s a vital document that you’ll need to complete your tax return. At Utah Avenue Insurance, we’re here to make this process as easy as possible and ensure you understand how your health insurance and taxes connect. Let’s break it down step by step.

What Are Premium Tax Credits (Subsidies)?

Subsidies are financial assistance provided by the government to help make health insurance more affordable. These credits lower your monthly premiums based on your household size and estimated income for the year. This is how the government helps make insurance affordable for those that don't qualify for an affordable group health plan. The goal is to ensure you’re not paying more than a certain percentage of your income for health coverage.

What Is a 1095-A?

The 1095-A is a tax form sent to individuals who enrolled in health insurance through the Health Insurance Marketplace or healthcare.gov website. You can expect to receive this form in the mail by the end of January. If you haven’t received it by early February, don’t worry—your agent at Utah Avenue Insurance can email you a copy to help you stay on track.

This form includes essential details about your health insurance coverage, such as:

Monthly Premiums: The total amount paid for your insurance each month. This amount is the full cost of your health plan and includes your premiums and how much was paid on your behalf through subsidies.
Premium Tax Credit Received: The amount of financial assistance (subsidies) you received to lower your monthly premiums. This amount was based on your household size, zip code, birthdays and income that you estimated on your health insurance application.
Coverage Details: Information about who in your household was covered and for how many months.

Why Is the 1095-A Important?

The 1095-A is essential because it helps you reconcile your Premium Tax Credit (subsidies) on your tax return. When you applied for Marketplace insurance, your monthly subsidy amount was based on your estimated income. Now, during tax season, the IRS requires you to compare your actual income to your estimate to determine if you received the correct amount of financial assistance. This comparison, or reconciliation is a requirement to continue your subsidized health insurance on the Marketplace.

Filing Your Tax Return With the 1095-A

When you or your CPA files your taxes, the information on your 1095-A is used to complete IRS Form 8962. This form calculates:

Whether you received the correct subsidy amount. If you estimated your income correctly and it matches your actual income for the year, you will not see any difference on your tax return.
If you owe additional premiums. This is because you underestimated your income on your Marketplace application and received too much help on your monthly premium. Income can be updated at anytime in the year, so if you owe those extra premiums at tax time, now is the best time to reach out to your local agent and have them update your income on your current health insurance application.
If you’re eligible for a refund. This happens if you overestimated your income. This means you were paying too much throughout the year for your health plan. Now is a great time to reach out to your local agent and have them update your income on your current application and see if you can lower your premium or if you are eligible for a better plan.

Failing to include your 1095-A with your tax return could delay your refund or lead to issues with the IRS, so it’s crucial to get this step right. You can also lose the subsidies on your current health plan or lose your plan altogether if you don't file.

Why We Estimate Income on Applications

When you apply for Marketplace insurance, you’re asked to provide an estimate of your annual income for the year that the health plan will be active. This estimate determines your eligibility for subsidies. However, if you are a self-employed individual, your income can fluctuate throughout the year due to business changes, seasonal trends, or unexpected expenses. If you are hourly or salaried employee you may have a gap in employment or get a raise in the middle of the year. That’s why this estimate is just that—an estimate.

At the end of the year, your actual income may differ from your initial estimate, requiring reconciliation when you file your taxes:

Underestimating Your Income: If your actual income is higher than what you estimated, you may have to pay back some or all of the subsidies you received.
Overestimating Your Income: If your actual income is lower, you may receive an additional refund for the subsidies you were eligible for but didn’t receive.

How Utah Avenue Insurance Can Help

We know taxes can be stressful, especially when you’re managing a business and a family. That’s why we’re here to assist you every step of the way. Your agent at Utah Avenue Insurance can:

Email You Your 1095-A Form: So you have quick, easy access to this crucial document.
Help You Understand Subsidy Reconciliation: We’ll explain how your income estimate impacts your tax return and help you avoid surprises.
Provide Year-Round Support: Whether you have questions about estimating income or updating your application mid-year, we’re just a call or email away.

Don’t Wait—File Early

Having your 1095-A in hand means you can complete your tax return early and avoid delays in getting your refund. If you need help accessing your form or understanding the details, contact your Utah Avenue agent today. We’ll ensure you have everything you need to file confidently and get the most out of your Marketplace health insurance.

At Utah Avenue Insurance, we specialize in helping self-employed families like yours navigate health insurance and tax season with ease. Let us know how we can help you today!