Hi, Cutbanlemon,
What you are describing is a Section 105 Self-insured Medical Reimbursement Plan. This is the law that governs that type of plan. We cannot advise you on the audit risk related to this plan, but this article from the Journal of Accountancy does address some of what may go wrong in compliance. Assuming that you qualify, you would report these types of expenditures under Row 14 Employee Benefit programs on your SCH C (assuming you have not elected to be taxed under another entity (e.g., S-Corp).
Hope this helps.
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Regards,
Karen
TurboTax Expert
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