Section 6056 was added to the IRS tax code with the passing of the Affordable Care Act (also known as Obamacare) and explains what businesses need to do to notify their employees and the IRS about the health care coverage they offer.
The Affordable Care Act (also known as Obamacare) requires certain employers to either offer health insurance coverage to their employees or pay a penalty. As part of that requirement, the law added Section 6056 to the Internal Revenue Code. This section outlines what these companies must do to notify both their workers and the IRS about the coverage the employer offers. In general, it does not apply to businesses with fewer than 50 workers.
Applicable large employers (ALEs)
Section 6056 applies only to "applicable large employers.” These are employers that have at least 50 full-time workers or full-time equivalents, commonly called FTEs. An FTE is a combination of part-time workers whose hours add up to full-time work.
Under the law, full-time work is defined as an average of 30 hours/week or more. So two workers who each work 15 hours/week would add up to one FTE, as would a 20-hour worker and one who works 10 hours a week (20 + 10 = 30 hours = one FTE).
Reporting coverage to employees
Under Section 6056, employers must send a statement at year’s end to each worker who is eligible for employer-sponsored insurance, regardless of whether they actually participate in the employer’s health plan. This statement is called Form 1095-C, and it tells an employee which months out of the year he was eligible for coverage and how much the cheapest premiums available to him would have cost.
Reporting coverage to the IRS
Applicable large employers must give the IRS copies of all 1095-C forms it sends to its employees. When it does so, it has to provide a separate form, the 1094-C, which acts as a kind of “cover sheet” for the information. This form identifies the employer and says how many 1095-C forms are being sent. Employers with more than 250 forms must file them with the IRS electronically. Those with fewer than 250 can send paper forms if they choose.
Timelines for filing
In general, the forms required under Section 6056 are to be sent to employees by January 31 and to the IRS by the end of February (or the end of March if filing electronically). However, the reporting requirements took full effect in the 2015 tax year, meaning that the first mandatory forms don't have to be sent until January 2016. The IRS did encourage employers to go ahead and send workers 1095 forms for 2014 if possible, both for employees' information and to test and troubleshoot the process.
Get every deduction
TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.