1095 Form for Small Business Owners: A Simple Guide

Navigating tax forms can be daunting, especially for small business owners juggling multiple responsibilities. The 1095 Form is one such document that often causes confusion. Whether you’re a solopreneur, a startup founder, or a small business employer, understanding this form is crucial for compliance and avoiding penalties.

This guide breaks down everything you need to know about the 1095 Form, including its purpose, who needs to file it, and how to do it correctly—all while keeping up with today’s evolving tax landscape.

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What Is the 1095 Form?

The 1095 Form is part of the Affordable Care Act (ACA) reporting requirements. It serves as proof that individuals had qualifying health coverage during the tax year. There are three versions of the form:

• Form 1095-A: For those who purchased insurance through the Health Insurance Marketplace.
• Form 1095-B: For insurers and small employers (self-insured plans).
• Form 1095-C: For applicable large employers (ALEs) with 50+ full-time employees.

Small business owners typically deal with Forms 1095-B or 1095-C, depending on their size and insurance offerings.

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Who Needs to File the 1095 Form?

Small Employers with Self-Insured Plans (Form 1095-B)

If your business provides a self-insured health plan, you must file Form 1095-B for each covered employee. This applies even if you have fewer than 50 employees.

Applicable Large Employers (Form 1095-C)

Businesses with 50 or more full-time equivalent (FTE) employees must file Form 1095-C. This form confirms whether you offered affordable, minimum-value coverage to full-time employees.

Exemptions for Very Small Businesses

If you have fewer than 50 employees and do not offer a self-insured plan, you generally do not need to file a 1095 form. However, always verify with a tax professional, as state laws may differ.

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How to Fill Out the 1095 Form Correctly

Step 1: Determine Which Form Applies

• Form 1095-B: For self-insured small businesses.
• Form 1095-C: For businesses with 50+ employees.

Step 2: Gather Employee and Coverage Information

You’ll need:
- Employee names, SSNs, and addresses.
- Details of health coverage offered (start/end dates, affordability, and minimum value).

Step 3: Complete the Form Accurately

• Part I (Employee Information): Fill in personal details.
• Part II (Employer Offer of Coverage): Indicate months coverage was offered (Form 1095-C).
• Part III (Covered Individuals): List dependents covered under the plan.

Step 4: Distribute Copies to Employees

• Deadline: January 31 of the following year.
• Method: Mail or electronic delivery (with employee consent).

Step 5: File with the IRS

• Deadline: February 28 (paper) or March 31 (electronic).
• Form 1094: Must accompany 1095 forms as a transmittal document.

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Common Mistakes to Avoid

1. Missing Deadlines

Late filings can result in penalties of up to $290 per form (2024 rates).

2. Incorrect Employee Classification

Misclassifying full-time vs. part-time employees can lead to ACA penalties.

3. Failing to Offer Coverage to Eligible Employees

ALEs must offer coverage to 95% of full-time employees or face fines.

4. Not Keeping Records

Retain copies of all filed forms for at least three years in case of an IRS audit.

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How Recent Changes Affect Small Businesses

Inflation Reduction Act & ACA Affordability Adjustments

The IRS updates affordability thresholds annually. For 2024, employer-sponsored plans must cost employees no more than 8.39% of household income to be deemed affordable.

Remote Work & Multi-State Compliance

With more employees working remotely, businesses must ensure compliance with state-specific health insurance mandates.

IRS Enforcement Trends

The IRS has increased audits on small businesses for ACA compliance, making accurate filings more critical than ever.

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Tools & Resources to Simplify Filing

• IRS AIR System: For electronic filing.
• Payroll Software: Many platforms (e.g., Gusto, QuickBooks) automate 1095 reporting.
• Tax Professionals: A CPA or ACA specialist can help avoid costly errors.

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Final Tips for Stress-Free Compliance

✅ Start Early – Don’t wait until January to gather data.
✅ Double-Check Data – Ensure SSNs and coverage details are correct.
✅ Stay Updated – Tax laws change frequently; subscribe to IRS updates.

By mastering the 1095 Form, small business owners can avoid penalties, streamline operations, and focus on growing their ventures in today’s competitive economy.