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Why Do You Need a 1095-A Form when Filing Your Taxes?

As tax season rolls around, it's essential to gather all the necessary documents to ensure a smoot h and accurate filing process. One such crucial document is the 1095-A form. While it might seem like just another piece of paper, understanding its significance can help you navigate the complexities of tax season more effectively.

Several tax papers in a scattered pile

What is a 1095-A Form?

The 1095-A form, also known as the Health Insurance Marketplace Statement, is a document issued by the Health Insurance Marketplace (also known as the Exchange). It provides information about the health insurance coverage you obtained through the Marketplace during the previous year.

Why Do You Need a 1095-A Form?

  1. Proof of Health Insurance Coverage: The 1095-A form serves as proof that you had health insurance coverage through the Marketplace during the tax year. This information is crucial because it helps determine whether you meet the requirements of the Affordable Care Act (ACA), commonly known as Obamacare, which mandates individuals to have health insurance coverage or pay a penalty.

  1. Premium Tax Credit (PTC) Eligibility: If you enrolled in a Marketplace plan and received advance payments of the premium tax credit to help lower your monthly premium costs, you'll need the information provided in the 1095-A form to reconcile these payments on your tax return. The premium tax credit is designed to make health insurance more affordable for individuals and families with moderate incomes.

  1. Reconciliation of Advance Payments: When you file your taxes, you must reconcile the amount of premium tax credit you received in advance with the amount you were eligible for based on your actual income for the year. The information on the 1095-A form, including details about your premium payments and the second-lowest cost silver plan (SLCSP) in your area, is used to complete Form 8962 (Premium Tax Credit), which determines if you owe additional tax or are entitled to a refund.

  1. Tax Penalty Exemptions: If you didn't have health insurance coverage for the entire year and are seeking an exemption from the individual mandate penalty, you may need the information from your 1095-A form to support your exemption claim.

Tips for Handling Your 1095-A Form

  1. Review for Accuracy: As with any tax-related document, it's crucial to review your 1095-A form for accuracy. Ensure that the information regarding your coverage period, premium payments, and any advance premium tax credits received is correct.

  1. Keep it Safe: Treat your 1095-A form with the same care as you would any other tax document. Store it in a secure location along with your other tax records, such as W-2s and 1099s, to ensure easy access when needed.

  1. Seek Assistance if Needed: If you have questions about your 1095-A form or how to use it when filing your taxes, don't hesitate to seek assistance from a tax professional or utilize resources provided by the IRS or the Health Insurance Marketplace.

The 1095-A form plays a vital role in tax filing for individuals who purchased health insurance through the Health Insurance Marketplace. Whether you're reconciling premium tax credits or proving compliance with the ACA's individual mandate, having this document on hand is essential for accurately completing your tax return. By understanding its significance and following the necessary steps, you can navigate tax season with confidence and ensure compliance with federal tax laws.

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