In a way, your daughter was unlucky.
Your daughter was self-employed. She needed to report her income on her federal tax return and pay the self-employed FICA tax, the medicare tax, and the income tax on her profits. That's probably what happened, so she really can't complain.
Why was she unlucky? The parents should not have given her a 1099. You only give a 1099 to someone if you are engaged in a business and pay someone at least $600 for services. You don't 1099 people you pay for personal services (like babysitters, gardeners, and the like). (You give a W2 to a regular day nanny, because she is a "household employee").
If she didn't get a 1099, she still has to report the income under the law. As a lawyer, I would advise her to follow the law and report the income. But if she doesn't, the IRS will never know. So most babysitters don't.
