Given that she is a family member, and this is not her normal trade or business, she is not required to file a Schedule C with her Income Tax Return. However, given that you are required to submit her SS# on your return, somewhere down the line, should she be contacted by the IRS regarding this $1,000, it is far better for her to just "nip it in the bud now", so to speak. What I would advise is that she files a Schedule C along with her personal 1040, report the $1,000 in earnings (not reported on a 1099 - there is a line for this) and then in the expenses section, she should itemize certain allowable and completely understandable expenses to offset this $1,000. Having said this, she should ONLY be concerned about paying Self-Employment Tax if she has other (somewhat) significant forms of income. Again, my advice, itemize a portion of the following:
1. Cell phone bill
2. Fuel for transportation for that time frame (don't use actual mileage then she has to
detail her vehicle type, year of purchase, etc., etc.)
3. Any/all food, clothing, toys purchased for the minor child (WITHIN REASON ie - $300
max)
4. "Materials/Supplies" purchased for the minor child (arts/crafts items the child used
while under her care even if purchased at an earlier time)
This should give you a better idea as to the end result you are aiming for. She would use her name and address, as well as SS#, for the "business" purpose information she will be asked for. This process just really prevents any potential future hassle should the IRS "flag" that $1000 you're claiming.
