Hi Hal_Al,
I'm not sure that putting them under household employee is correct but I've also been told so many different things that I don't know for sure.
I also am married and my parents watch my children in my home and I pay them. I filed for the dependent care credit and my situation meets the requirements to be exempt from paying them taxes.
However, I was told by a turbo tax CPA that they should not put the income under household employee because the IRS would consider it taxable income for them. They said to have them file it as self employment income and indicate that it is money made by being a caregiver to their grandchildren.
Does this sound correct? The sum is over $10,600 and the household employee area indicates that you can't put the sum there if its over $2200.
