@AmeliesUncle wrote:
I hate to disagree with MacUser, but I agree with the OP; a grandparent watching only their grandchild is rarely a business. In most cases it should be reported as "other income".
The source of the payments do not matter.
However, properly reporting it as "other income" will likely result in MORE tax than if it was reported as a business.
If it was a business, all of the expenses would be a deduction. For a daycare business, that is A LOT of deductions. It would almost certainly result in a loss. Interestingly, if the grandparent were to continue to report losses year after year, the IRS could audit her, look at the situation, and reclassify it as a non-business ... which would be reported as "other income" with no deductions.
The IRS would disagree with you. As pointed out above the IRS specifically addresses this in Pub 17. Being self-employed IS business income in the eyes of tax law, even if you only babysit a relatives child for a few hours. If paid more than $400 it must be reported as self-employed income.
And expenses, if any, are deductible on schedule C. For example: food provided for the child by the sitter would be deductible or other sitter provided supplies, such as diapers. baby wipes, etc.
Refer to IRS Pub 17
https://www.irs.gov/pub/irs-pdf/p17.pdf page 44 for the rules of child care providers and babysitters.
Babysitting. If you’re paid to babysit, even for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you
Childcare providers. If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. If you aren’t an employee, you’re probably self-employed and must include payments for your services on Schedule C (Form 1040 or 1040-SR), Profit or Loss From Business. You generally aren’t an employee unless you’re subject to the will and control of the person who employs you as to what you’re to do and how you’re to do it.
It is also not "other income" which is defined on page 29 of the 1040 instruction - babysitting is not "other income" as defined in IRS pub 525.
https://www.irs.gov/pub/irs-pdf/i1040gi.pdf
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
