The tax return of your babysitter has nothing to do with whether you paid her money to care for your children. Whether she is a dependent or not, she has taxable income from watching your children. Whether she declares this income or not is not, shall we say, your problem. Your ability to deduct the costs is completely unrelated to the tax return of the recipient. You are not responsible for her tax reporting.
That being said, if you claim the expenses and input her SSN (which you are required to do), the IRS may notice that she didn't claim it. That still doesn't impact your return in any way, though- it still only impacts her.
Its still the child's income. Even if a person is a dependent of another taxpayer, the income they make from working could only go on their tax return. As far as her parents go, it doesn't impact their tax return. Would it impact them if their child got in trouble with the IRS? Yes, probably. But that's only because they are her parents- its not about their taxes.
