If
they don't pay her as an employee and they use this on the Day Care
Credit on form 2441 then the IRS will send a notice if failure to file
along with penalties and taxes.
I'm not convinced the IRS is going to send a notice. The IRS computer will know how much someone else claimed for the CDDC credit but not whether it was for self-employment or wages. The computer will also know the child is 14. That should result in no notice as wages.
From Pub 926 (Household Employer's Tax Guide) - wages not counted as FICA includes: An employee who is under the age of 18 at any time during the year. Exception: Count
these wages if providing household services is the employee's principal
occupation. If the employee is a student, providing
household services is not considered to be
his or her principal occupation.
