Well you can keep it simple ... if you pay them less than $30K for the year you can just consider this a gift and no one pays taxes on the income or takes a child care credit which usually offset each other anyway.
Or you could get more complicated ... if they work in your home you need to report the home employees income on a Sch H or provide W-2 forms (like a nanny) and pay the FICA taxes OR if they work from their home they get to report the SE income on a Sch C and pay SE taxes on the profits. Taking this route allows you to take the day care credit form 2441 but like I said it will basically be an offset.
