If you’re like most Americans, you’re glad to see 2020 in the rearview mirror. And now, the next big task on your to-do list might be getting ready to file your taxes as an official farewell to a not-so-great year. But before you e-file or meet with your accountant, there are a few things to consider, especially with regard to your health insurance. Here are three tax tips before you officially file your 2020 taxes.
Documenting Your Annual Revenue
Before you rush to the accountant’s office or hit enter on the e-file, you might want to wait. There are a handful of year-end forms, specific to your revenue earnings, you might still need to collect before officially crunching your 2020 tax totals. Companies, government agencies, and providers have until January 31, 2021, to postmark necessary documents by mail. Here are three things you’ll need to wait for before filing.
Employer W2, Unemployment, or Contractor 1099
Before you can file, you know you need to wait until your employer sends your W2 for the year. But if you found yourself unemployed for any part of 2020, you may need to wait for a 1099-G from your state outlining your total unemployment benefits, as well. If you worked in a freelance or an independent contractor capacity, you’ll need to document your 1099 work and any estimated taxes.
If at any point throughout 2020, you received a stimulus check because of the pandemic, you will need to wait to obtain documentation of your economic impact payment (EIP.) There may also be an IRS notice 1444 or other records you can use to demonstrate what income you collected as part of the pandemic relief payments. This may include pandemic unemployment supplemental payments as well as any Economic Disaster Relief Funds from the state level in the form of loans or grants.
Investment Accounts and Mortgage Payments
If you have investment accounts, you’ve probably earned interest and may need to wait for documentation regarding that annual income. Your home mortgage lender will provide a Form 1098 documenting any interest you’ve paid over the year. Any rental property you might own or revenue earned from the sale of stocks would also need to be recorded as part of your tax filing. There is typically a form for every type of potential revenue earned. Just be mindful of accurate reporting now, so you don’t have audit headaches later.
Important Health Insurance Forms You’ll Need Before Filing
In addition to your working income, revenue, or net profits for the year, you will also need to have the appropriate health insurance forms before filing your taxes. For example, if you had a health savings account, you might need to wait for your 1099-SA. But for most individuals, there are three types of health insurance-related forms to look for, depending on the type of coverage you had for 2020.
This form is your health insurance Marketplace statement, should you have had coverage under a plan you selected through the exchange. You should definitely wait to file your taxes until you have received this form. The deadline for the Marketplace to provide the 1095-As is January 31, 2021.
This form is an outline and proof of health coverage. Some Americans may not receive their 1095-B before filing their taxes, and that’s ok. It’s not necessary to wait for these in order to file your taxes.
Coverage providers and employers will provide these forms. And much like the 1095-B, the 1095-C forms are not required to complete your tax filing. Insurers, certain employers, and some others may have extensions to provide these. These provided health insurance offers, and coverage forms will be proof you were offered and enrolled in a plan for 2020.
Premium Tax Credit FAQ
Tax time also means it’s time to settle up with the Marketplace regarding your premium tax credits for 2020. When you selected your 2020 health insurance plan, you estimated your income. But no one could have predicted COVID-19, and your original projections could have been far from your financial reality last year.
Filing a Federal Income Tax Return Is Required
For those who elected to have the premium tax credit in advance, meaning the advance went directly to the insurer to lower monthly premiums, a Form 8962 must be filed. This Premium Tax Credit (PTC) form will highlight if the individual overestimated or underestimated earnings the year. The taxpayer may receive a higher refund, or additional tax may be due accordingly. But not filing with the Form 8962 can delay your refund and may even affect your future credits eligibility.
Reported or Non-Reported Changes
When you originally qualified for the Premium Tax Credit, you did so based on your projected income, family composition, and physical address. If any of those dynamics shifted throughout 2020, you should have reported those changes to the Marketplace. If you did not, you’ll need to do so now as you file, as you may owe or be entitled to more credits.
Correcting or Voiding a Form 1095-A
The Marketplace Statement of coverage arrives, and let’s say you notice a discrepancy. Don’t file without first making the corrections. You may still be able to proceed with this year’s tax filings. But you may also need to file an amended tax return to align with any corrections.
When it comes to deductions and reporting losses, an accounting professional can always be a great resource to help. And if you’re not sure which forms you should be waiting for, your accountant or bookkeeper can help review your financial situation and make suggestions. Intentionally or unintentionally, misreporting can lead to costly fines and a mess of paperwork to amend and make corrections. However, if you know what forms you need to file and receive them without a problem, you can move forward with filing your taxes as you normally do.
But if you’re ready to talk about health insurance or experience a qualifying life event in 2021 that affords you a special enrollment period, browse plans with W3ll. We can help you calculate your Premium Tax Credit eligibility for this year and provide free tools to help you compare, shop, and enroll in affordable health insurance.