If care was provided in her home, then she is considered self-employed, and she is responsible for reporting her own income and paying her own taxes. You don't need to issue any kind of form (like a 1099 or W-2) or withhold or pay any taxes.
If you plan to claim the Child and Dependent Care Credit, you will need to provide her name, address and social security number on your tax return. That will alert the IRS to look for matching income on her tax return. Whether she actually owes tax, and how much, will depend on her overall income and other tax situations.
If you don't claim the child care credit, the IRS won't be notified of her income, and she will be on the "honor system" to report it. That's between her and the IRS.
