This year, you may have received a tax form you haven’t seen before: the 1095-B. It’s a form sent by your health insurer or employer that shows you had the minimum health insurance needed to avoid a tax penalty during the tax year. (In short, it’s an Obamacare thing.) You could also receive a similar form, the 1095-C, if you work for a company with more than 50 employees. You might actually receive both or multiple forms, depending on your insurance setup and employment situation throughout the tax year.
If that seems confusing, relax. You don’t even need these forms to file your taxes.
“You just need to check a box that says you had health coverage,” said Debra Hammer, a senior communications manager with TurboTax. “You most likely will receive a form, but it’s not required.”
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If you didn’t have health coverage for the full year and don’t qualify for an exemption, like financial hardship or gaps in coverage for less than 3 months, you may need to pay a penalty. Tax software should help you calculate that penalty, and if you’re going the pen-and-paper route for tax preparation, you can find information about the penalties on HealthCare.gov.
“The only real problem with the 1095-B is that people are afraid that if they don’t have one that they cannot file their tax returns until that get the form when in reality, most of the time the information about health insurance is on their W-2 coded DD in box 12,” wrote Bill Farmer, an Enrolled Agent with HTI Tax Service, in an email. “Another dead giveaway that a person has had health insurance is that they have a code W in box 12 which indicates that they have a Health Savings Account.”
Even if you get a 1095-B or 1095-C, it’s quite likely you won’t need to do anything with them other than file them away with the rest of your tax paperwork. The extent of your Obamacare-related tax activities may be limited to checking that single box indicating you had health insurance for the year.
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But not everyone has it so easy. There’s the 1095-A, which has been around for two years and goes to people who had coverage through the health insurance marketplace. It’s required to reconcile the insurance premium credits you may have received and what you really qualify for, based on the difference in your actual income and the estimated income you used when applying for health coverage — it determines if you received too little or too much of a health care subsidy and will affect your tax refund or tax bill.
“Where the whole thing starts getting hairy is when you have an A-B or an A-C combination — the person got a credit part of the year and had company-provided insurance part of the year,” Farmer said. It’s common for such taxpayers to have to repay the credits they received, he added.
It can be understandably stressful to end up owing taxes you didn’t expect to have to pay, but figuring out a way to cover that bill is important. You could pay your taxes with a credit card, though there are fees associated with that option, or you could take out a personal loan if you need help. You could also work out a payment plan with the IRS. Not paying isn’t a great option, because it can eventually get more expensive with fees and interest, not to mention the potential impact on your credit score.
Whether or not you’re fretting over 1095s, it’s probably a good idea to started filing those tax returns, if you haven’t already. Either you’ll get your refund sooner or have more time to ask questions and figure out how to tackle the tax bill you need to pay by April 15.