An Applicable Large Employer (ALE) is defined as an organization with 50 or more full-time employees. An ALE is required by law to offer health insurance to full-time staff. Organizations of this size who fail to provide the required benefits are subject to penalties by the IRS.
If you’re a small business with less than 50 full-time employees, you are not considered an ALE. Essentially, you are self-insured and therefore exempt from this health insurance requirement.
Instead, each employee is eligible for the Affordable Care Act (ACA). However, if your small business chooses to offer health insurance benefits, you may be entitled to a Small Business Health Care Tax Credit.
If your business doesn’t qualify as an ALE, you’ll need to use Form 1095-B to submit information about the health packages you offer (if you choose to do so) and employees’ enrollment status.
What is Form 1095-B?
Form 1095-B is a government-issued health insurance tax form that reports each citizen’s type of coverage, dependent status, and coverage period. This form is used by the IRS to verify that taxpayers and their dependents have the minimum essential health insurance coverage guaranteed by the Affordable Care Act (ACA). Those who do not have health insurance will face a penalty on their tax return. There are a few exceptions, but most individuals are required to maintain coverage.
Taxpayers with a private coverage policy or a small business employer-sponsored plan will receive a Form 1095-B. The form will come from the insurer, the employer, or both (assuming the business is not an ALE).
Do you have to file a 1095-B on your taxes?
Insurance companies are required to send out Form 1095-B to all taxpayers receiving benefits. Recipients must complete the form and send it back to the insurer.
These forms are mandatory because they provide proof of coverage. Those who do not complete a form or fail to have the minimum essential coverage will be penalized on their tax returns.
How do I fill out Form 1095-B?
Form 1095-B is broken down into four sections. Each of which requires basic information from the policyholder. Follow the steps below to complete Form 1095-B.
Each policyholder must:
- Record their name. The name must be the primary name on the insurance policy.
- Identify the name of the employer offering the coverage. If coverage is privately held, move onto step 3.
- List the name of the insurance company providing the benefits.
- List the names of each dependent receiving coverage. This section will also require the primary owner on the account to record coverage dates for each dependent.
What’s a Form 1094-B?
Once policyholders have completed and returned Form 1095-B to the insurer, the provider must then submit a Form 1094-B to the IRS. This form shows the IRS if the individual meets the minimum coverage requirements for health insurance.
A Form 1094-B is a one-page document that serves as a cover sheet. The IRS can easily determine each taxpayer’s health coverage status from the sheet.
Now you’re ready to take on the Form 1095-B and meet the health insurance documentation requirements. Do you have more questions about Form 1095-B or ALE requirements? We can help.