I will be paying my mother $700 a month for childcare in her home, does she need to report this income and is it subject to tax? She would not exceed 40 hours a week.

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VolvoGirl

Level 15

Does she have other income? Or file a Joint return with a husband? She probably needs to file it on her tax return and pay self employment tax on it. If you want to get the Child Care Credit for it you need her ssn and she needs to report it as income.

SweetieJean

Alumni - Champ

I agree that she must claim this and pay taxes on it.

JJMidwest2Author

Level 2

She does not have another source of income. She does not feel she should need to report it because she doesn't want to pay taxes on it.

null725

Level 13

Unfortunately, she doesn't have a choice. IRS Pub 501 says that you must file if you have net self-employment income of more than $400. You must file and pay self-employment tax even if no ordinary income tax is owed. See Table 3, page 5, IRS Pub 501 at this link:
You can find IRS Pub 501 at this link:
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/p501.pdf">https://www.irs.gov/pub/irs-pdf/p501.pdf</a>
When you claim the credit for it, you must list her SSN and the IRS will check to see that she files and reports the income.

VolvoGirl

Level 15

Sorry the self employment tax on 8,400 is about $1,200.

SweetieJean

Alumni - Champ

"she doesn't want to pay taxes on it." The tax law does not give that choice. How does she support herself with no income?
I suppose you could gift her the money, but then you cannot claim the Child Care Credit on your own return.

SweetieJean

Alumni - Champ

If she is receiving any govt benefits (food stamps, housing, etc.), the fact that you provide her with $7,000 could impact those in any case.

Critter

Level 15

Your only choice it to call it a gift and don't take the child care credit if she doesn't want to call it income.

JJMidwest2Author

Level 2

She files jointly with my dad, she does not work.

TomD8

Alumni - Champ

Grandma must report the income, but in my opinion she is not required to pay SE tax, assuming she takes care only of her own grandkids, in her own home. That's because she's not in the trade or business of providing day care in her home. Grandma should report the income on line 21 of her Form 1040. She does not need to do a Schedule C or SE. My opinion is based on the examples in this IRS reference: https://www.irs.gov/businesses/small-businesses-self-employed/family-caregivers-and-self-employment-...

**Answers are correct to the best of my ability but do not constitute tax or legal advice.