The American Institute of CPAs has asked the Internal Revenue Service to clarify the deductibility of health insurance premiums covering S corporation shareholders.

The institute sent a proposed ruling to the agency, suggesting that guidance originally issued in May shift the emphasis from the titling of policies to the payor of the premiums, whether payment is direct or indirect. The AICPA’s proposal also makes clear that because certain state laws require group policies to cover more than one employee -- and therefore, many corporations not eligible for group policies --  this should not prevent shareholders in small organizations from deducting premiums above-the-line.

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