Yes you must report all your income no matter how small. Even $1 of bank interest. If you don't give them a W2 then they have to file it as self employment income. And anything over $400 will be taxed.
Do you claim this family member as a dependent on your return? You can not get the Child Care Credit for paying someone you claim on your return.
It would depend on if that was her only income. If its her only income she would not be required to file. If the total income she makes is greater than 10,500, any additional income, including the 5000 from you, would need to be reported.
Yes she has to file it as self employment income. Anything over $400 for self employment. If it was on a W2 she wouldn't have to file it if it's under 10,300 (not 10,500).
How is the baby sitter related to you? Does she sit in your home or hers? Do you claim the Dependent Care Credit based on what you pay her? How much do you pay her? Is she your dependent?
