Child care expense question: We pay our Mother (child's grandmother) $850 a month to watch our baby. Can we count this as a childcare expense?

We don't withhold taxes as she not considered a "nanny".  If we are allowed to deducted this amount which will be less than $11k, will she have to report the income?  She didn't work in 2014, so this was her only source of income.  We have cancelled checks as record of payment.