Common Mistakes Advisors Make When Handling Health Tax Forms

As a financial advisor, understanding health tax forms is essential for accurate tax planning and compliance. Forms such as 1095-A, 1095-B, and 1095-C provide key 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 confusion and frustration
  
  

Ensuring accuracy allows advisors to protect clients, maximize benefits, and avoid costly mistakes.

Mistake 1: Misreading Form 1095-A

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

• Monthly premiums and premium tax credit amounts
  
  

• Coverage months for dependents
  
  

• Second Lowest Cost Silver Plan (SLCSP) benchmark
  
  

Example: If an advisor overlooks a dependent’s coverage month, the client may receive an incorrect premium tax credit reconciliation, resulting in unexpected taxes owed. Double-checking the form ensures accurate reporting on Form 8962.

Mistake 2: Ignoring Other Health Tax Forms

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

• Overlooking months of coverage reported on 1095-B
  
  

• Misunderstanding employer coverage responsibilities reported on 1095-C
  
  

• Assuming all clients receive a 1095-A when they do not use Marketplace insurance
  
  

Reviewing all relevant forms ensures that coverage is verified and avoids IRS penalties.

Mistake 3: Overlooking Gaps in Coverage

Gaps in health insurance coverage can impact eligibility for tax credits or trigger individual responsibility penalties. Advisors may miss:

• Short-term coverage gaps
  
  

• Late employer coverage start dates
  
  

• Dependent coverage gaps
  
  

Scenario: A client switched employers mid-year and had a one-month lapse in coverage. If an advisor does not account for this gap, the client may be incorrectly credited for full-year coverage, leading to potential IRS adjustments.

Mistake 4: Failing to Coordinate With Tax Professionals

Health tax forms often require careful interpretation to ensure ACA compliance and accurate premium credit calculations. Advisors may make errors if they fail to:

• Communicate with the client’s CPA or tax preparer
  
  

• Verify that the health tax form aligns with IRS records
  
  

• Confirm all coverage and premium amounts before filing
  
  

Collaboration ensures clients remain compliant and avoid costly mistakes.

Mistake 5: Not Keeping Accurate Records

Proper documentation protects both clients and advisors:

• Maintain copies of all health tax forms securely
  
  

• Track coverage changes throughout the year
  
  

• Use forms to support deductions, credits, and filings
  
  

Accurate records reduce the risk of audits or disputes with the IRS and make year-end planning easier.

Best Practices for Advisors

To avoid mistakes when handling health tax forms, advisors should:

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

2. Verify coverage months, premiums, and dependent information
   
   

3. Identify gaps or discrepancies in coverage
   
   

4. Coordinate with CPAs or tax preparers when needed
   
   

5. Maintain organized records for every client
   
   

Following these steps ensures clients receive accurate guidance and maximize available benefits.

How Health Tax Forms Influence Broader Tax Planning

Health tax forms affect more than ACA compliance; they also intersect with broader financial strategies:

• Premium Tax Credits: Correct interpretation ensures clients claim the maximum credit without errors.
  
  

• Charitable Giving or Deductions: Certain adjustments may interact with coverage premiums to impact deductions.
  
  

• Retirement Planning: Accurate health expense tracking can influence AGI, which affects IRA contributions or Roth conversions.
  
  

• Year-Round Planning: Reviewing health tax forms proactively allows advisors to plan for future coverage and avoid surprises at filing.
  
  

By leveraging these forms, advisors can integrate healthcare information into a holistic client tax strategy.

Common Misconceptions

Advisors should also be aware of common misconceptions clients have about health tax forms:

• Believing they only need to review 1095-A forms
  
  

• Assuming all employer-provided coverage automatically satisfies ACA requirements
  
  

• Thinking gaps in coverage are irrelevant if they are short-term
  
  

Educating clients on these points improves compliance and prevents misunderstandings.

Final Thoughts

Health tax forms are a critical component of 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 tax forms into a planning advantage. Let’s talk and make sure your clients’ coverage and credits are fully optimized for smarter tax strategies.

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.