Where will you be doing the babysitting----in your own home or the home of the baby and the parents? If you call the income a "gift" (which it is not) the parents cannot claim the childcare credit and they get no tax benefit. In order for them to get the childcare credit, they have to show your SSN on their tax return and report how much they paid you. And then your own tax return must show a matching amount for the income you received for providing the childcare.
If you provide the childcare in your own home, you would report the income as self-employment income and pay self-employment tax -- for Social Security and Medicare, and possibly ordinary income tax--depending on how much other income you are receiving. You would also prepare a Schedule C for any expenses you incur such as expenses for food, snacks, diapers, toys, etc etc.
If you have self-employment income for which you will pay self-employment tax for Social Security and Medicare, you will need to use online Premium software or any version of the desktop software download so that you can prepare a Schedule C for your business expenses.
https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...
https://ttlc.intuit.com/community/self-employed/help/what-is-the-self-employment-tax/00/25922
https://ttlc.intuit.com/turbotax-support/en-us/help-article/import-export-data-files/enter-self-empl...
If you babysit in the parents' home, you could be considered to be a "household employee" and they can issue a W-2 to you, which, of course, would be entered on your own tax return if you have enough income to meet the filing requirement.
Please see the links regarding household employees. There are exceptions to the SS and Medicare withholding rules for grandparents who are babysitting as "household employees" -- so your grandchild's parents are not required to withhold SS and Medicare from your pay.
https://ttlc.intuit.com/turbotax-support/en-us/help-article/taxation/considered-household-employee/L...
https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-payments/pay-taxes-pay-household-emp...
**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
