Hal_Al
Level 15

Deductions & credits

"What if my mother in law is currently unemployed and is collecting unemployment". 

 

Nothing changes, tax wise.  Unemployment Compensation is  taxable income. as is the baby sitting income.

 

As to how baby sitting income affects her Unemployment Compensation, you'll nee to contact the state unemployment office.  It's my understanding, that income must be reported in most states and will most likely reduce her compensation.