Common Mistakes Advisors Make When Handling Health Care Tax Forms

Understanding health care tax forms is essential for accurate tax planning and compliance. Forms like 1095-A, 1095-B, and 1095-C provide critical information on health insurance coverage, premium tax credits, and potential penalties.

Mismanaging these forms can lead to:

• Lost premium tax credits
  
  

• Incorrect deductions
  
  

• IRS notices or audits
  
  

• Client frustration
  
  

Ensuring accuracy benefits both your clients and your advisory practice.

Mistake 1: Misreading Form 1095-A

Form 1095-A reports coverage through the Health Insurance Marketplace and is crucial for calculating premium tax credits. Advisors often misread key sections:

• Premiums paid and premium tax credit amounts
  
  

• Coverage months for dependents
  
  

• Second-lowest cost silver plan (SLCSP) benchmark
  
  

Double-checking the form ensures accurate reconciliation on Form 8962 for clients who received marketplace coverage.

Mistake 2: Ignoring Other Health Care Tax Forms

Forms 1095-B and 1095-C report employer-provided or other health coverage. Common errors include:

• Overlooking months of coverage reported on 1095-B
  
  

• Misunderstanding employer coverage responsibilities reported on 1095-C
  
  

• Assuming all clients receive a 1095-A if they don’t use marketplace insurance
  
  

Review all relevant forms to verify coverage and prevent penalties.

Mistake 3: Overlooking Gaps in Coverage

Gaps in health insurance can affect eligibility for tax credits or trigger individual responsibility penalties in some years. Advisors may miss:

• Short-term coverage gaps
  
  

• Late employer coverage start dates
  
  

• Dependents’ coverage gaps
  
  

Identifying these gaps ensures proper planning and accurate reporting.

Mistake 4: Failing to Coordinate With Tax Professionals

Clients may need guidance on ACA compliance or premium tax credit calculations:

• Miscommunication can lead to missed credits or deductions
  
  

• Advisors should coordinate with CPAs or tax preparers when reviewing health care tax forms
  
  

• Confirming forms match IRS records prevents errors on tax returns
  
  

Collaboration ensures clients remain compliant and receive maximum benefits.

Mistake 5: Not Keeping Accurate Records

Proper documentation protects both clients and advisors:

• Maintain copies of all health care tax forms securely
  
  

• Track coverage changes throughout the year
  
  

• Use forms to support deductions, credits, and tax filings
  
  

Accurate records reduce the risk of audits or disputes with the IRS.

Best Practices for Advisors

To avoid mistakes when handling health care tax forms, follow these steps:

1. Review all relevant forms: 1095-A, 1095-B, 1095-C
   
   

2. Verify coverage months and premium amounts
   
   

3. Identify any coverage gaps or discrepancies
   
   

4. Coordinate with tax professionals for complex situations
   
   

5. Keep accurate records for each client
   
   

Implementing these practices ensures clients receive accurate advice and maintain ACA compliance.

Final Thoughts

Health care tax forms are a critical component of effective tax planning. Advisors who understand how to review, verify, and coordinate these forms can protect clients from penalties, maximize credits, and provide confident guidance.

Turn health care tax forms into a planning advantage. Let’s talk and make sure your clients’ coverage and credits are fully optimized.

Disclaimer: This material is provided for informational purposes only and does not constitute tax advice. Consult a qualified tax professional or CPA for guidance on the specific tax situation.